A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Question

​A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Quizplus · Accepted Answer

In a perfectly competitive market, a firm should continue to operate in the short run as long as it can cover its variable costs, even if it's not covering its total costs. This is because, by covering variable costs, the firm can contribute to fixed costs and minimize losses. Serving breakfast would be a viable option if it generates enough revenue to cover the variable costs associated with offering that meal.

​A Restaurant, Which Operates in a Perfectly Competitive Market, Is

A Restaurant, Which Operates in a Perfectly Competitive Market, Is