Answer:
c. cease production immediately, because it is incurring a loss.
Explanation:
When a business engages in production it looks to make profit. That is for the production price to be higher than cost incurred in producing the good.
However when the price is lower than the average variable cost as is indicated in the scenario then the firm needs to shut down production in the short term.
Factors that will adversely affect a firm in the short term are price, average total cost, and average variable cost.
Once price is less than average total cost or average variable cost it is better to stop production.
As they are incurring an economic loss
Answer: cease production immediately, because it is incurring a loss
Explanation:
A perfectly competitive industry is an industry whereby firms make similar products, and there are many firms and customers.
Since from the scenario, the market price is less than its average variable cost, it is advisable for the firm to stop producing. This is because the firm isn't covering its variable cost, therefore it's running at a loss.
