Question

At the point at which P=MC, suppose that a perfectly competitive firm's MC = $100, its AVC = $80 and its AC = $110. This firm should

Answer 1

Answer: continue operating in the short run.

Explanation:

In the short run, at least one of the input that is used in the production of a good or service is fixed while the other inputs are variable.

A firm will continue to operate in the short run in a situation whereby the price is more than the average variable cost.

Since we've been told that P=MC, abd that the perfectly competitive firm's MC = $100, AVC = $80 and AC = $110, the firm should continue operating in the short run because the price ($100) is more than the AVC($80).