Asked by
Austin Busold
on Dec 11, 2024
Verified
Suppose the minimum average total cost (ATC) of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC) was $.80 per unit. If the market price was $.75 per unit, a profit-seeking firm would
A) shut down immediately.
B) produce where MR = MC in the short run.
C) shut down in the long run but remain in business in the short run.
D) do both b and c.
Average Total Cost
The total cost of production divided by the quantity of output produced, indicating the cost per unit of output.
Average Variable Cost
The total variable cost divided by the number of units produced, reflecting the variable cost of producing each unit.
- Ascertain the scenarios where a company should persist, diminish, or stop production activities in the short run.
- Acquire knowledge of how a firm's average variable cost and average total cost relate to market price in operational decision-making contexts.
Verified Answer
NP
Learning Objectives
- Ascertain the scenarios where a company should persist, diminish, or stop production activities in the short run.
- Acquire knowledge of how a firm's average variable cost and average total cost relate to market price in operational decision-making contexts.