A catfish farmer will shut down production when
A)He is losing money.
B)Price falls below AVC.
C)Total revenue falls below total costs.
D)The best he can do is break even.

Question

Quizplus · Accepted Answer

A catfish farmer, or any producer, will shut down production in the short run when the price falls below the average variable cost (AVC). At this point, the firm cannot cover its variable costs, and it minimizes its losses by ceasing production. Continuing to produce would lead to greater losses than the fixed costs of shutting down.

A Catfish Farmer Will Shut Down Production When