Would a profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short run?
What will be an ideal response?
A profit-maximizing firm will continue to operate even if price falls below average cost, as long as price is above average variable cost. This is because, even if price is less than average cost, as long as a part of the fixed cost is covered, it makes sense to continue production since the alternative is to shut down and incur the entire fixed cost. Thus, a profit-maximizing firm will shut down only when price falls below its average variable cost of production in the short run.
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When considering rent seeking, which of the following is TRUE?
A) The anti-free trade group generally will lobby more than the pro-free trade group. B) The pro-free trade group generally will lobby more than the anti-free trade group. C) Usually only the anti-free trade group is concerned about what is best for society at large. D) Only the pro-free trade group is concerned about the government's revenue from tariffs.
A firm's accounting profit is measured as
A) operating expenses minus revenue. B) revenue minus operating expenses and taxes paid. C) revenue plus operating expenses minus taxes paid. D) net worth minus economic profit.
Which US President was in office during World War I?
a. Grover Cleveland. b. Herbert Hoover. c. Abraham Lincoln. d. Woodrow Wilson.
Most markets in the United States:
A. have some degree of competitiveness, but are not perfectly competitive. B. have very few competitive features and so are regulated by the government. C. are monopolies. D. are perfectly competitive.