In the short run,a purely competitive seller will shut down if product price:

A) equals average revenue.
B) is greater than MC.
C) is less than AVC.
D) is less than ATC.

Question

In the short run,a purely competitive seller will shut down if product price:A)  equals average revenue.B)  is greater than MC.C)  is less than AVC.D)  is less than ATC.

Yogesh Patel · Accepted Answer

Final Answer : C, Explanation :  In the short run, a purely competitive seller will shut down if the product price is less than the minimum point of the average variable cost (AVC) curve. At this price, the firm is unable to cover its variable costs, which means it cannot even cover the cost of producing each unit of output. Therefore, it is better for the firm to shut down and minimize its losses. If the product price is equal to the AVC, the firm would simply break even and continue to operate in the short run. If the product price is greater than the AVC, the firm would continue to operate and make a profit in the short run. If the product price is less than the average total cost (ATC), the firm would continue to operate, but incur losses.

In the short run,a purely competitive seller will shut down if product price:

A) equals average revenue.
B) is greater than MC.
C) is less than AVC.
D) is less than ATC.

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