Question

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) and that the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would.
a. immediately shut down and get out of the industry.
b. continue to produce a quantity such that marginal revenue equals marginal cost.
c. shut down temporarily, in hopes of restarting in the near future.
d. cut price and expand output in hopes of achieving economies of scale.
e. None of the above.

Answer 1

Answer:

b. continue to produce a quantity such that marginal revenue equals marginal cost.