If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?
A)It will shut down in the short run and wait until the price increases sufficiently.
B)It will exit the industry in the long run.
C)It will operate at a loss in the short run.
D)It will minimize its loss by decreasing output so that price exceeds marginal cost.

Question

Quizplus · Accepted Answer

In the short run, a firm will minimize its loss by producing where marginal cost equals marginal revenue, not by decreasing output to where price exceeds marginal cost.

If a Competitive Firm Cannot Earn a Profit at Any