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QUESTION
XI-4 9. A perfectly competitive firm is initially operating at an output Q* where MR = MC, and P = min ATC. Then its fixed costs rise and its...
XI-4 9. A perfectly competitive firm is initially operating at an output Q* where MR = MC, and P = min ATC. Then its fixed costs rise and its variable costs are unchanged, but its average costs rise. At its previous output level Q*, P > min AVC. How should the firm respond in the short run? A. It should increase output.
