Question

If the price is below average total cost, then in the short run a perfectly competitive firm should: A. raise price. B. continue to produce to minimize losses. C. shut down. D. There is not enough information given to answer this question.

Answer 1

B. continue to produce to minimize losses.

Step-by-step explanation:

A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. Buyers and sellers are price takers Because they cannot set prices of products.

If in the short run, price is below average variable cost, the firm should shut down.

If price is below average total cost in the short run, the firm should continue production.

I hope my answer helps you