Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. In the short run, firms in this market will shut down if the market price is:
A)greater than $10.
B)less than $15.
C)less than $10.
D)less than $5

Question

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.  In the short run, firms in this market will shut down if the market price is:
A)greater than $10. 
B)less than $15. 
C)less than $10. 
D)less than $5

Quizplus · Accepted Answer

The minimum of the AVC curve is $5, so firms will shut down if price falls below $5.

Assume That All Firms in This Industry Have Identical Cost