A Perfectly Competitive Firm Produces 3000 Units of a Good

question 29

Multiple Choice

A perfectly competitive firm produces 3000 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 incurring 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 minimising its loss.
• D)There is insufficient information to answer the question.

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Definitions:

Real Economic Growth

An increase in the economic output of a country adjusted for changes in the price level (inflation), indicating an expansion in the economy over time.

Technological Growth

The process of innovation and introduction of new technologies and methods, which improves efficiency and productivity.

Productivity

A measure of the efficiency of production, often calculated as the ratio of output to input in the production process.

Economic Policies

Measures and strategies implemented by governments to regulate and control the economy, including fiscal, monetary, and trade policies.