A competitive firm is choosing an output level to maximize its profits in the sh

Question

A competitive firm is choosing an output level to maximize its profits in the short run. Which of the following is not necessarily true? (Assume that marginal cost is not constant and is well defined at all levels of output).

(I already have the answer, please explain or show work)

a. Marginal cost is at least as large as average variable cost.

b. Total revenues are at least as large as total costs.

c. Price is at least as large as average variable cost.

d. Price equals marginal cost.

e. The marginal cost curve is rising.

Explanation / Answer

b. Total revenues are at least as large as total costs.

The competitive firm can make losses in the short run, so that total revenues can be less than total costs. The requirement is that total revenues should at least be as large as total variable costs.

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