Many furniture stores run "going out of business" sales but never actually go out of business.Assume that furniture is sold in a perfectly competitive market.For a furniture firm to actually shut down in the short run,the price of furniture must be _____ than the _____ average variable cost.

Question

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In the short run, a perfectly competitive firm will shut down if price is lower than its minimum average variable cost. This is because it cannot cover its variable costs and will incur losses greater than its fixed costs if it continues to operate. Therefore, for a furniture firm to actually shut down in the short run, the price of furniture must be lower than the minimum average variable cost.

Many Furniture Stores Run "Going Out of Business" Sales but Never