Under perfect competition, if P > AVC, the firm should shut down to minimize losses, unless it can find long-term investors who are willing to offer leverage financing. True False
Added by Fatima Y.
Step 1
Under perfect competition, if the price is greater than the average variable cost (P > AVC), it means the firm is covering its variable costs and contributing something towards its fixed costs. Show more…
Show all steps
Your feedback will help us improve your experience
Mauya Mitchell and 88 other Macroeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
The aggressive financing strategy is risky in two respects: the firm operates with a low level of ________, and the firm has only a limited amount of ________ capacity. Answer a. current liabilities; short-term borrowing b. net working capital; short-term borrowing c. current assets; long-term borrowing d. net working capital; long-term borrowing
Sanchit J.
'True or False? A firm will make a profit when the price it charges exceeds the average variable cost of the chosen output level: To maximize profits in the short-run, a firm must minimize costs If economic profit is positive, firms will enter the market in the short run'
Haricharan G.
"If the firm's profit margin is too low, the firm should simply increase its debt ratio." True or false? Select one: a. False b. True
Jennifer S.
Recommended Textbooks
Principles of Economics
Macroeconomics
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD