Suppose a Perfectly Competitive Firm's Minimum Average Variable Cost Is

question 275

Multiple Choice

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2,the firm should

• A) continue to produce, but produce more than 50.
• B) continue to produce 50.
• C) continue to produce, but produce less than 50.
• D) shut down.
• E) continue to operate, but to determine the amount of production needs more information than is given.

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Definitions:

Kilograms

A unit of mass in the metric system, equivalent to one thousand grams.

Production Budget

An estimate of the total units that must be produced in a given period to meet anticipated sales demand and ending inventory requirements.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus the cost of goods sold.

Units

A generic term referring to the basic measure or quantity of a product or service.