Answer to Question #226863 in Economics for Bea

Question

• A profit-maximising firm sells its product for R300, but continues to produce even though it is making a loss. This suggests that A. the average total cost is less than the price.
•  B. the average variable cost is less than the price.
•  C. the average fixed cost is less than the price.
•  D. the marginal cost is less than the price.

Answer 1

If a profit-maximising firm sells its product for R300, but continues to produce even though it is making a loss, then this suggests that the average variable cost is less than the price.

So, the correct answer is B.