The following Question is asking about the theory rather than a specific case:

A firm is operating in a perfectly competitive industry where there are constant returns to scale. Please use graph the following questions.

Find the quantity supplied by this competitive firm when market price in the short run is P₁ and P₁ intersects marginal cost at a point below average total cost but above average variable cost. Establish the firm's profit or loss at this output level. Will the firm continue to produce in the short run or will it shut down?