Business, 07.03.2020 04:36 lucarignot

A startup firm in a perfectly competitive market finds that its average total cost is higher than the market price. Since the firm is incurring short-run losses, the management is debating whether to continue operations. Alex Ferguson, a senior manager, feels that this is a temporary phase and the firm should continue operations. Which of the following, if true, would support Alex's argument?
a. The managers of the firm have worked for other firms that produced products with an even greater difference between average total cost and market price.
b. Other firms in the same industry have higher labor costs but lower raw material costs.
c. The current price of the product covers the variable cost of production.
d. Economic activity in recent months has been sluggish.
e. The price of the product is expected to remain stable over the coming months.

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