If price falls below the minimum point on the AVC curve, in the short run the firm should , and in the long run the firm should .

A) produce where MC = MR; exit the industry
B) shut down; exit the industry
C) produce where MC = MR; expand
D) shut down; expand

Question

If price falls below the minimum point on the AVC curve, in the short run the firm should ________, and in the long run the firm should ________.

A) produce where MC = MR; exit the industry
B) shut down; exit the industry
C) produce where MC = MR; expand
D) shut down; expand

Monea Mcadams · Accepted Answer

Final Answer : B, Explanation :  In the short run, if the price falls below the minimum point on the Average Variable Cost (AVC) curve, the firm should shut down to minimize losses because it cannot cover its variable costs. In the long run, if the situation does not improve, the firm should exit the industry as it cannot cover its total costs, including fixed costs.

If price falls below the minimum point on the AVC curve, in the short run the firm should , and in the long run the firm should .

A) produce where MC = MR; exit the industry
B) shut down; exit the industry
C) produce where MC = MR; expand
D) shut down; expand

Definitions

Learning Objectives

Learning Objectives

Related questions

If price falls below the minimum point on the AVC curve, in the short run the firm should ________, and in the long run the firm should ________.A) produce where MC = MR; exit the industryB) shut down; exit the industryC) produce where MC = MR; expandD) shut down; expand

Definitions

Learning Objectives

Learning Objectives

Related questions

If price falls below the minimum point on the AVC curve, in the short run the firm should , and in the long run the firm should .

A) produce where MC = MR; exit the industry
B) shut down; exit the industry
C) produce where MC = MR; expand
D) shut down; expand