If price is equal to short-run average variable cost,this price is known as
A)the break-even price.
B)the profit-maximizing price.
C)the shutdown price.
D)the revenue-maximizing price.

Question

Quizplus · Accepted Answer

If the price is equal to the short-run average variable cost, the firm is not covering its fixed costs, and is therefore operating at a loss. In this case, the best choice for the firm is to shut down in the short run until prices increase or costs decrease. Thus, the price is known as the shutdown price.

If Price Is Equal to Short-Run Average Variable Cost,this Price