Answer:
The firm should continue to produce in the short run and reevaluate in the long run
Step-by-step explanation:
When we two or more firms that are competing with one another keep producing goods or providing services that are similar to one another, only that none of these products or services can actually act as a substitute for the other goods/services, it is said that the firms are in monopolistically competition.
So, we are given the following information which will aid in solving the question above;
The firm's profit maximizing quantity is q = 8, firm's individual good is given by P = 40 - qd and the firm's AVC = 20.
We are given that P = 40 - qd, therefore, P = 40 - 8 = 32.
This value, that is 32 is greater than the AVC given which is 20. Hence, The firm should continue to produce in the short run and reevaluate in the long run. If AVC is less than P, then otherwise would have happened instead.