The figure Represents the cost structure for a perfectly competitive firm with i

Question

The figure Represents the cost structure for a perfectly competitive firm with its average total cost per average variable curve and marginal cost curve fixed costs are $50. Suppose the market price is $22 per unit. Characterize the firms profit. If the phone for deuces output then it will _______ (break even, make a profit, experience losses)?
Should the firm instead shut down in the short run? In the short run the firm should?
A. Continue to produce because Price is greater than average fixed cost. B. Continue to produce because Price is greater than average variable cost. C. Shut down because Price is greater than average variable cost. D. Shut down because price is less than average total cost. E. Shut down because Price is less than fixed cost. Leslie Valadez This Qu MC ATC 30.00- 28.00 -- 26.00 24.00 22.004 20.0 AVC 8 18.00- 2 16.00- o 14.00 12.00 10 4.00 2.00 0.001 0 5 6 78 Quantity

Explanation / Answer

Firm is earning losses at market price of $ 22 because firm is not able to cover all its costs instead able to cover all its variable cost and some of its fixed cost.

B. Continue to produce because Price is greater than average variable cost.

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