Asked by Haley Yasui on Jun 23, 2024
Verified
In the short run, a competitive firm will not produce unless price is at least equal to average total costs.
Average Total Costs
dividing the total production costs by the quantity of produced units gives the cost for each unit.
Short Run
A period in which at least one factor of production is fixed, limiting the ability of a business to fully adjust to changes in market conditions.
- Pinpoint the situations that enable a corporation to reach its highest profit or reduce its losses to the minimum in the short run.
- Recognize the significance of average total costs in a firm’s production decisions.
Verified Answer
JB
Joelle BassalJun 25, 2024
Final Answer :
False
Explanation :
In the short run, a competitive firm will continue to produce as long as the price is at least equal to its average variable costs, even if the price is below its average total costs. This is because, in the short run, the firm will want to cover its variable costs, while fixed costs are sunk and do not affect the decision to produce.
Learning Objectives
- Pinpoint the situations that enable a corporation to reach its highest profit or reduce its losses to the minimum in the short run.
- Recognize the significance of average total costs in a firm’s production decisions.