Answer to Question #74514 in Microeconomics for kavi
A purely competitive firm finds that the market price for its product is $25.00. It has a fixed cost of $100.00 and a variable cost of $15.00 per unit for the first 50 units and then $30.00 per unit for all successive units.
P = $25.00. If FC = $100.00 and AVC = $15.00 per unit for the first 50 units and then AVC = $30.00 per unit for all successive units, then the firm should produce no more than 50 units, because P < AVC at AVC = $30 and the firm should shut down.
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