You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The Shop's total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm to
A. raise its price until it breaks even.
B. lower its price so that it can sell more units of output.
C. produce in the short run to minimize its loss, but exit the industry in the long run.
D. cease production immediately because it is incurring a loss.
Answer: C
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What will be an ideal response?
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Which statement is true?
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