Explain why a competitive firm should stop producing

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Reference no: EM1319489

Q. Elucidate the reason Explain why a competitive firm should stop producing immediately if the price is lower than the average variable cost.

Consider the following table.

Quantity Total cost
1 $10
2 12
3 16
4 22
5 30
6 40
7 52
8 66

(1) Calculate marginal cost for each quantity.
(2) Assume to the price of the product is $10. Elucidate how many units will the firm produce?
(3) In the long run, will the price rise or fall from the present level at $10? Elucidate the reason.

Reference no: EM1319489

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