Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then this firm should:
A)produce 45 units of output.
B)shut down in the short run.
C)raise its price to increase its revenue.
D)lower its output to decrease its marginal cost.

Question

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then this firm should: 
A)produce 45 units of output. 
B)shut down in the short run. 
C)raise its price to increase its revenue. 
D)lower its output to decrease its marginal cost.

Quizplus · Accepted Answer

The firm should shut down in the short run because $9 is less than the minimum of its AVC curve.

Refer to the Accompanying Graph