Suppose that the demand for my new book, Spatulas From Around the World, is such that the demand curve lies everywhere below the average variable cost of producing it.To maximize profits or minimize losses, I should
A)raise price
B)lower price to increase demand
C)shut down the presses printing my book
D)lower price until demand is inelastic
E)charge the highest price I can

Question

Quizplus · Accepted Answer

Since the demand curve lies everywhere below the average variable cost, it means that the revenue from selling the book is not sufficient to cover the variable production costs, let alone fixed costs. Therefore, continuing to produce the book will result in losses. The best option in this case is to shut down the presses and halt production, minimizing losses.

Suppose That the Demand for My New Book, Spatulas from Around