The Pampered Pet Shop operates in a perfectly competitive industry and hires you

Question

The Pampered Pet Shop operates in a perfectly competitive industry and hires you as an economic consultant. The firm is currently producing at a point where market price equals its marginal cost. Its total revenue exceeds its total variable cost, but is less than its total cost. You advise the firm to a. raise its price until it breaks even. b. cease production immediately because it is incurring a loss. c. produce in the short run to minimize its loss, but exit the industry in the long run. d. lower its price so that it can sell more units of output. In the long run, a firm a. can shut down, but it cannot exit the industry. b. can vary all inputs, but it cannot change the mix of inputs it uses. c. has no fixed factors of production. d. must make positive economic profits.

Explanation / Answer

Question 5 : lower its price so that it can sell more units of output

Question 6 : can vary all inputs, nut cannot change the mix of inputs it uses

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