If the Price Is Less Than the Average Variable Cost

question 28

Multiple Choice

If the price is less than the average variable cost the firm should produce

• A)Zero
• B)Where MC=MR
• C)Where ATC is minimized
• D)Where AVC is minimized

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Definitions:

Long-Run Supply

The total amount of a product or service that is available to the market from all producers over a long period, when all inputs can be adjusted.

Purely Competitive

An idealized market structure in which there are many buyers and sellers, no barriers to entry or exit, and perfect information, leading to prices being determined by supply and demand.

Market Supply Curve

A graphical representation showing the total quantity of a good that sellers are willing and able to sell at various prices, holding all else constant.

Purely Competitive

A market structure characterized by a large number of small firms producing similar products, with easy entry and exit from the market, leading to price-taking behavior.