Assume Two Firms Have the Same Total Costs of Production

question 73

Essay

Assume two firms have the same total costs of production. Firm A's average variable cost if $5 per unit and firm B's average variable cost is $7. Both firms have an average total cost of $8. If the current market price is $6 and remains unchanged what action will both firms take in the short run and the long run?

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Definitions:

Volatile Storage

Memory that requires power to maintain the stored information; it loses its contents when the power is turned off.

Flash Memory

A type of non-volatile storage that can be electronically erased and reprogrammed, used in USB drives, SSDs, and other digital devices.

CPU

Central Processing Unit, the primary component of a computer responsible for interpreting and executing most of the commands from the computer's other hardware and software.

Memory Modules

Physical components that store digital information temporarily or permanently, such as RAM sticks or SSDs.