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A firm shuts down if the price is? A) below average total cost. B) above minimum average fixed...

Question:

A firm shuts down if the price is?

A) below average total cost.

B) above minimum average fixed cost.

C) below minimum average variable cost.

D) above minimum average variable cost.

E) less than marginal cost.

Shut Down vs Exit:

A firm in the short-run will choose whether to shut down or continue operations. This is because they have fixed costs in the short-run and can't exit entirely. In the long-run the firm will choose whether to exit or stay in the market.

Answer and Explanation: 1

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Answer: C

A firm shuts down if its total revenue is below its minimum total variable cost. If this happens, the firm can't produce any level of...

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Profit Maximization: Definition, Equation & Theory

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Chapter 24 / Lesson 6
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Learn the profit maximization definition, its importance, and explore the profit maximization theory. See how to calculate profit maximization with examples.


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