A firm will choose to shut down rather than operate as long as
A) price is greater than or equal to AFC.
B) AVC is greater than AFC.
C) price is less than AVC.
D) MC is greater than AVC.

Question

Quizplus · Accepted Answer

A firm will choose to shut down in the short run if the price it can get for its product is less than its average variable cost (AVC). At prices below AVC, the firm cannot cover its variable costs, so it minimizes its losses by not producing.

A Firm Will Choose to Shut Down Rather Than Operate