When price exceeds average variable cost but not average total cost,the firm should,in the short run,
A)Shut down.
B)Produce at the rate of output where MR = MC.
C)Minimize per-unit losses by producing at the rate of output where ATC is minimized in the short run.

Question

Quizplus · Accepted Answer

When price exceeds average variable cost but not average total cost, the firm is still covering its variable costs and can continue to operate in the short run. The best choice is for the firm to produce at the rate of output where MR = MC, because this will maximize profits (or minimize losses) in the short run.

When Price Exceeds Average Variable Cost but Not Average Total