In the short run, a perfectly competitive firm produces output using capital services (a fixed input) and
Question:
a. What is the relationship between this firm’s average variable cost and its marginal cost? Explain.
b. If the firm has 10 units of capital and the rental price of each unit is $4/ day, what will be the firm’s profit? Should it remain open in the short run?
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a MC VC Q wL Q wMP Similarly AVC wL Q wAP So when APMP ...View the full answer
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