Question

g will shut down for sure when the market price is​ _____.A.less than ​$ a B.less than the marginal costC.greater than the marginal costD.less than average total costE.​$ a

Answer 1

Answer:

B. less than the marginal cost

Explanation:

In the short run, a firm should shut down if price is less than average variable cost or marginal cost. the firm should shut down because it is making losses. When the firm shuts down, it still incurs some fixed cost such as rent but it would not incur variable cost e.g. wages.

The firm should exit the market in the long run if price is less than average total cost