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4 Cards in this Set
- Front
- Back
1. Profit maximization 2. Loss minimization 3. Shutdown rule |
Three short-run production alternatives facing a firm |
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Shutdown |
The perfectly competitive firm is presumed to (blank) production and produce no output in the short run, if price is less than average variable cost. |
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Profit maximization |
Price exceeds average total cost (ATC) at the quantity that equates marginal revenue and marginal cost. In this case, the firm generates an economic profit.
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Loss minimization |
Price is greater than average variable cost but is less than average total cost at the quantity that equates marginal revenue and marginal cost. In this case, the firm incurs a smaller loss by producing some output than by not producing any output. |
