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A competitive firm operating in the short run is maximizing profits and just breaking even. Its costs include a monthly license fee of $100 that is imposed by the state and must be paid for as long as
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45 votes
45 votes
A competitive firm operating in the short run is maximizing profits and just breaking even. Its costs include a monthly license fee of $100 that is imposed by the state and must be paid for as long as the firm is in existence. The license fee is now raised to $150. To continue to maximize profits in the short run, the firm should: Question 2 options: a) increase output. b) increase price. c) not change output. d) reduce output.

User Dougie
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1 Answer

18 votes
18 votes

Answer:

C

Step-by-step explanation:

The short run is a period where all factors of production are fixed. In the short run, a firm would continue to produce if price is above average variable cost. If this is not the case, it would shut down.

In the short run, price and output cannot be changed.

The long run is a period where all factors of production are varied. It is known as the planning time for a company

User OxyDesign
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