Question:
If a perfectly competitive firm finds that the profit maximizing output level occurs whereprice is equal to marginal cost but is less than average variable cost
| A. |
the firm will continue to operate in the short run since total revenue exceeds total variable cost but will exit the industry in the long run |
B. |
the firm will continue to operate in the short run since it has to pay the total fixed cost whether or not it continues to operate |
C. |
the firm will increase its selling price to raise revenue in order to be able to continue to operate profitably in the short run |
D. |
the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing |
Answer» d. the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing |
| Note: |
The above multiple-choice question is for all general and Competitive Exams in India. |
