Question #296882

19. Suppose a given firm operating in a perfectly competitively market.


TFC = birr 600


TVC = birr 500 and TR = birr 700.


Should the firm stay in the business? What will be you answer if the TR changes to birr 450?



Expert's answer

As TR > TVC, then the firm can cover its variable costs and the firm should stay in the business.

If the TR changes to birr 450, then TR < TVC, so the firm should shut down.


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