Question
Suppose a perfectly competitive firm can produce10000 bushels of corn a year at an output at which marginal revenue is equal to marginal cost. The
Suppose a perfectly competitive firm can produce10000 bushels of corn a year at an output at which marginal revenue is equal to marginal cost. The market price of corn per bushel is $2. The firm's total costs per year are $30000 and fixed costs per year are $15000.
Show and explain which of the following is true:
In the short run, this firm should
a) Produce 20000 bushels to try to increase economic profit.
b) Produce 10000 bushels of corn because, although they are losing money, they are losing less than if they shut down.
c)Shut down.
d) Continue producing until the price of corn increases.
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