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:

Completed Goods

Finished products ready for sale or distribution, produced from raw materials through the manufacturing process.

Completed Goods

Finished products that are ready for sale or distribution, having passed through all stages of production.