In the wake of the 2008 recession, the electronics retailer Circuit City closed its stores. If we assume this was a short-run decision, the most likely explanation for it is that the price of a typical product sold at Circuit City stores was:
A) greater than the average total cost of producing the toy.
B) equal to the average total cost of producing the toy.
C) less than the average total cost of producing the toy but greater than the average variable cost.
D) less than the average variable cost of producing the toy.

Question

Quizplus · Accepted Answer

In the short run, if the price of a product is less than the average variable cost, the firm cannot cover its variable costs and will minimize losses by shutting down operations.

In the Wake of the 2008 Recession, the Electronics Retailer