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A competitive firm in the short run incure losses. The firm continue production, if:
- a)P>AVC
- b)P=AVC
- c)P<AVC
- d)P>=AVC
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
A competitive firm in the short run incure losses. The firm continue p...
Is greater than AVC
b)P is greater than ATC
c)P is greater than MC
d)All of the above
Answer: d) All of the above
Explanation:
In the short run, a competitive firm will incur losses if its total revenue (TR) is less than its total variable costs (TVC). However, the firm may still continue production if it can cover its variable costs and contribute towards covering its fixed costs.
a) If P is greater than AVC (average variable cost), the firm can cover its variable costs and may continue production to contribute towards covering its fixed costs.
b) If P is greater than ATC (average total cost), the firm can cover both its variable and fixed costs and may continue production.
c) If P is greater than MC (marginal cost), the firm is generating revenue that is greater than the additional cost of producing one more unit and may continue production to maximize its profits.
Therefore, if any of the above conditions are met, the firm may continue production despite incurring losses in the short run.
b)P is greater than ATC
c)P is greater than MC
d)All of the above
Answer: d) All of the above
Explanation:
In the short run, a competitive firm will incur losses if its total revenue (TR) is less than its total variable costs (TVC). However, the firm may still continue production if it can cover its variable costs and contribute towards covering its fixed costs.
a) If P is greater than AVC (average variable cost), the firm can cover its variable costs and may continue production to contribute towards covering its fixed costs.
b) If P is greater than ATC (average total cost), the firm can cover both its variable and fixed costs and may continue production.
c) If P is greater than MC (marginal cost), the firm is generating revenue that is greater than the additional cost of producing one more unit and may continue production to maximize its profits.
Therefore, if any of the above conditions are met, the firm may continue production despite incurring losses in the short run.
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Community Answer
A competitive firm in the short run incure losses. The firm continue p...
As the competitive firm in short term incur loss the firm should only continue its production when the price of the commodity is more than or equal to the average variable cost i.e. when P>=AVC. So that the firm won't incur loss in near future.
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A competitive firm in the short run incure losses. The firm continue production, if:a)P>AVCb)P=AVCc)P<AVCd)P>=AVCCorrect answer is option 'D'. Can you explain this answer?
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