Question

A profit-seeking firm is in a competitive market and experiences the following production figures: marginal cost equals marginal revenue at $4.50, marginal cost equals average total cost at $6, and marginal cost equals average variable cost at $4. Based on these figures, what should it do

Answer 1

the firm should continue to operate in the short run since its marginal revenue is equal to its marginal costs. But in the long run, since the company's average total cost is higher ($6), then they should probably exit the market if they are unable to increase their marginal revenue.