If price lies above the minimum point on the ATC curve, in the short run the firm should ________ and in the long run it should ________.
A) produce where MC = MR; exit the industry
B) shut down; exit the industry
C) produce where MC = MR; expand
D) shut down; expand

Question

Quizplus · Accepted Answer

In the short run, if the price is above the minimum point on the Average Total Cost (ATC) curve, the firm should continue producing where Marginal Cost (MC) equals Marginal Revenue (MR) because it is covering all its costs and making a profit. In the long run, this profitability signals the firm should expand its operations to capitalize on its profitable position.

If Price Lies Above the Minimum Point on the ATC