In the short run, as long as SMC = MR = P, if price is greater than average variable cost, the firm should shut down.

Question

Quizplus · Accepted Answer

If price is greater than average variable cost, the firm should continue operating in the short run, even if it is experiencing losses. This is because the firm is able to cover its variable costs and can therefore minimize its losses by continuing to produce. However, if price falls below average variable cost, then the firm should shut down in the short run to minimize its losses.

In the Short Run, as Long as SMC = MR