A firm suffering idle plant capacity would minimize losses by selling its product abroad at a lower price than at home, provided that the foreign price more than covers average variable cost.

Question

Quizplus · Accepted Answer

By selling at a lower price abroad, the firm can still cover its variable costs and avoid greater losses from idle plant capacity. However, the foreign price must be high enough to cover at least average variable cost in order for this strategy to be effective.

A Firm Suffering Idle Plant Capacity Would Minimize Losses by Selling