revenue and cost (dollars per unit)\nthe above figure shows a perfectly competitive firm. if the market…

revenue and cost (dollars per unit)\nthe above figure shows a perfectly competitive firm. if the market price is $5 per unit, the firm\nwill definitely shut down to minimize its losses.\nwill stay open to produce and will make zero economic profit.\nwill stay open to produce and will incur an economic loss.\nmight shut down but more information is needed about the fixed cost.\nwill stay open to produce and will make an economic profit.

revenue and cost (dollars per unit)\nthe above figure shows a perfectly competitive firm. if the market price is $5 per unit, the firm\nwill definitely shut down to minimize its losses.\nwill stay open to produce and will make zero economic profit.\nwill stay open to produce and will incur an economic loss.\nmight shut down but more information is needed about the fixed cost.\nwill stay open to produce and will make an economic profit.

Answer

Explanation:

Step1: Identify shutdown - rule in perfect competition

A firm in perfect - competition shuts down in the short - run if $P<AVC$.

Step2: Analyze the graph

From the graph, at all levels of output, the minimum of the AVC curve is above $P = 5$. Since $P=$5$ per unit and $P<AVC$ at all output levels, the firm will shut down to minimize its losses.

Answer:

will definitely shut down to minimize its losses.