Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 233 units of output. At

Question

3 years ago

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Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 233 units of output. At

233 units, ATC is $12, and AVC is $9. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ for this firm.

Business

1 answer:

Anika [276] · Answer 1 · 2022-02-17T13:33:42+03:00

Answer:

Continue operating; $699

Explanation:

The equilibrium price is $10.

MR = MC at 233 units of output.

At this output level, ATC is $12, and AVC is $9.

The AFC or average fixed cost

= ATC - AVC

= $12 - $9

= $3

The total fixed cost

= $AFC\ \times Q$

= $\$ 3\ \times\ 233$

= $699

The equilibrium price is able to cover the average variable cost so the firm should continue production in the short run.