A Perfectly Competitive Firm Produces 3,000 Units of a Good

question 104

Multiple Choice

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

• A)No, it should shut down because it is making a loss.
• B)Yes, it should continue to produce because its price exceeds its average fixed cost.
• C)Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000.
• D)There is insufficient information to answer the question.

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Definitions:

Casualty Loss Deduction

A tax deduction allowed for losses from sudden, unexpected, or unusual events, such as natural disasters, fire, or theft, not compensated by insurance.

Insurance Settlement

A payment made by an insurance company to a policyholder following a claim for loss or damage covered by the policy.

Mumford

A scholar known for contributions to the understanding of leadership, creativity, and problem-solving.

Corporate Executives

High-ranking officers within a corporation who are responsible for making critical decisions, steering the company's strategy, and managing organizational operations.