Suppose a perfectly competitive firm can produce 20,000 bushels of corn a year at an output at which marginal cost equals marginal revenue. The market price of corn per bushel is $2.00. The firm's total costs per year are $50,000 and fixed costs per year are $25,000. In the short run, this firm should
A. shut down.
B. produce 40,000 bushels to try to increase economic profit.
C. produce 20,000 bushels of corn because, although they are losing money, they are losing less than if they shut down.
D. continue producing until the price of corn increases.
Answer: C
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