Question

If a competitive firm is producing a profit-maximizing level of output and chooses to continue operating at a loss, which of the following must be true? A. AC≥p≥AVC. B. p=MC. C. MR=MC. D. All of the above.

Answer 1

The answer is D, All of the above.

Step-by-step explanation:

The answer to the question is option D, All of the above. When a competitive firm is producing a profit-maximizing level of output and chooses to continue operating at a loss, it means that the firm's market price is below its average cost of production. This implies that the average cost (AC) is greater than or equal to the price (p), and the price is equal to the marginal cost (MC). So all the options provided which are AC≥p≥AVC, p=MC, and MR=MC are all the correct answers to this kind of scenario. Therefore, choices A, B, and C are all true in this scenario.