[amp_mcq option1=”Reduce the size of its plant to lower fixed costs” option2=”Raise the price of its product” option3=”Shut down” option4=”Continue to operate as long as it covers its variable cost” correct=”option4″]<\/p>\n
The correct answer is: D. Continue to operate as long as it covers its variable cost<\/strong>.<\/p>\n A perfectly competitive firm is a price taker, which means that it has no control over the market price of its product. If the market price is below the firm’s average variable cost, then the firm will shut down in the short run. This is because the firm will lose more money by producing and selling its product than it would by simply shutting down and paying its fixed costs. However, if the market price is above the firm’s average variable cost, then the firm will continue to operate in the short run. This is because the firm will make a profit by producing and selling its product, even though it will still be incurring some losses.<\/p>\n Here is a brief explanation of each option:<\/p>\n [amp_mcq option1=”Reduce the size of its plant to lower fixed costs” option2=”Raise the price of its product” option3=”Shut down” option4=”Continue to operate as long as it covers its variable cost” correct=”option4″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-54403","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n\n