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A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm co
A) Yes, it should continue to produce because its price exceeds its average fixed cost.B) Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000.C) No, it should shut down because it is making a loss.D) There is insufficient information to answer the question.

Respuesta :

Answer:

The correct answer is option B.

Explanation:

The quantity of output produced=3,000 units

The total cost of production is $36,000.

The fixed cost of production is $20,000.

The price of the good is $10.

The variable cost of production will be

=$36,000-$20,000

=$16,000

The total revenue earned is

=$10*3,000

=$30,000

The firm should continue to produce because the revenue is covering the total variable cost.

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