Biology Forums - Study Force

Suppose ABC Corp. is a firm producing newsprint in a perfectly competitive industry. We have the following information about the firm's production:
- output (Q) = 1500 tonnes per month
- average total cost (ATC) = $627 per tonne
- average variable cost (AVC) = $614 per tonne
- marginal revenue (MR) = $620 per tonne
- marginal cost (MC) = $620 per tonne
In the short run, this firm should

▸ reduce output because the price per tonne is less than ATC.

▸ shut down because the firm is incurring economic losses.

▸ increase output because MR is greater than AVC.

▸ maintain production at the current level.

▸ Not possible to determine because the price of the product is not known.

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