In the short run firms in perfect competition will still produce provided ?
Correct answer: A. The price covers average variable cost
- A. The price covers average variable cost
- B. The price covers variable cost
- C. The price covers average fixed cost
- D. The price covers fixed costs
Explanation
In the short run, fixed costs must be paid even if output is zero, so the firm continues producing when price covers average variable cost. It shuts down when price falls below average variable cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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