Question

How long the firm continue production in a short runof a firm operating under prefect competition

Answer 1

Short Run Profit. In an economic market all production in real time occurs in the short run. The short run is the conceptual time period where at least one factor of production is fixed in amount while other factors are variable in amount. Fixed costs have no impact on a firm's short run decisions.

In order to maximize profits in a perfectly competitive market, firms set marginal revenue equal to marginal cost (MR=MC). ... In the short-term, it is possible for economic profits to be positive, zero, or negative. When price is greater than average total cost, the firm is making a profit....

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