Continue producing because variable cost are covered

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Reference no: EM131006055

Which of the following statements is correct?

a. When price p is above a price taking firm’s SAC, the price taking firm profits may be negative but it will choose to continue producing as long as variable cost are covered.

b. When price p is above a price taking firm’s SAVC, but below its SAC, the price taking firm profits may be positive - in this case, it will choose to continue producing because variable cost are covered.

c. When price p is above a price taking firm’s SAVC, but below its SAC, the price taking firm profits will be negative - in this case, it will choose to continue producing because variable cost are covered.

d. All of the above.

Reference no: EM131006055

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