Economics · Short-run Production Decisions
A local cotton farmer operates in a perfectly competitive market. His total fixed cost is ₹10,000. When the market price equals his average variable cost (AVC), his total revenue just covers variable costs but none of the fixed costs. In this short-run situation, the firm should:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Reduce output by exactly half
- 2Increase price to recover fixed costs
- 3Exit the market immediately
- 4Continue production temporarily✓
Correct answer
Continue production temporarily
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