Asked by Zainab Issah on Jul 21, 2024
Verified
A profit-maximizing strategy becomes a loss minimization strategy when a firm in a perfectly competitive industry is producing where
A) AVC < P < ATC.
B) P > ATC.
C) P = ATC.
D) MR = MC < P.
AVC
Average Variable Cost, which is the total variable costs of production divided by the quantity of output produced.
ATC
Stands for Average Total Cost, a metric that represents the per-unit total cost of production, including both fixed and variable costs.
MR
Short for Marginal Revenue, the increase in total revenue a firm receives from selling one additional unit of a good or service.
- Interpret the conditions guiding a firm’s resolution to sustain or terminate production activities in the short run.
- Apply the concepts of average total cost, average variable cost, and marginal cost in making production decisions.
Verified Answer
PD
Pahuja DeepakJul 27, 2024
Final Answer :
A
Explanation :
When AVC < P < ATC, the firm is covering its variable costs but not its total costs, so it minimizes losses by continuing to produce rather than shutting down.
Learning Objectives
- Interpret the conditions guiding a firm’s resolution to sustain or terminate production activities in the short run.
- Apply the concepts of average total cost, average variable cost, and marginal cost in making production decisions.