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

question 106

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 it is minimizing its loss.
• D)There is insufficient information to answer the question.

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Definitions:

Complementary Goods

Products that are used together, where the consumption of one enhances the value or demand of the other.

Inferior Goods

Products whose demand decreases as the income of the consumer increases, contrasting with normal goods.

Substitute Goods

Products or services that can be used in place of one another, satisfying similar needs or desires.

Complementary Goods

are products or services that are used together, where the use or consumption of one increases the demand for the other.