Author Question: Will a perfectly competitive firm ever produce in the short run even though it is incurring an ... (Read 40 times)

jparksx · **on:** Jun 29, 2018

Will a perfectly competitive firm ever produce in the short run even though it is incurring an economic loss?

What will be an ideal response?

Question 2

When long-run average cost increases as output increases there are

A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) none of the above.

juicepod · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Yes, a perfectly competitive firm will continue to produce even though it is suffering an economic loss if the price exceeds the minimum average variable cost. In this case, even though the firm has an economic loss, if it shut down, its economic loss would be larger.

Answer to Question 2

B