Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
-Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is
A)above $6.30 but less than $8.
B)above $6.30.
C)less than $6.30 but more than $4.50.
D)less than $4.50.

Question

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is
A)above $6.30 but less than $8. 
B)above $6.30. 
C)less than $6.30 but more than $4.50. 
D)less than $4.50.

Quizplus · Accepted Answer

In the short run, a firm will continue to operate if the price covers average variable costs, even if it does not cover total costs, resulting in a negative economic profit. If the price is less than $6.30 but more than $4.50, it covers average variable costs but not total costs.

Figure 14-1 Suppose That a Firm in a Competitive Market Has the Has