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EC311 · Intermediate Microeconomics

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EC311 / TOPIC 23

7.1 Competitive firms and shutdown

One idea · follow the reasoning · then practise1 / 9

01

When should a loss-making firm keep producing in the short run?

Market stalls send goods toward a central stall beside a harbor with a checkpoint, coins, and cargo boats
VISUAL NOTE · Competitive markets A price-taking firm chooses quantity

If price is below average total cost, should the firm stop or produce to reduce its loss?