Question
Consider the following data for a perfectly competitive firm: equilibrium price = $14, quantity of output produced = 100 units, average total cost = $10,
Consider the following data for a perfectly competitive firm: equilibrium price = $14, quantity of output produced = 100 units, average total cost = $10, average variable cost = $ 8, average fixed cost= $2. If other firms in the industry have the same cost conditions, the firm:
a. Should shut down in the short run, because it is taking a loss of $400.
b. Continue to produce in the short run, but shut down in the long-run.
c. Shut down in the short run, because average variable cost is less than average total cost.
d. Expect entry of a new firms in the long-run because there are positive economic profit.
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