Exhibit 8-3 Cost per unit curves
-If the price of the firm's product in Exhibit 8-3 is $1.50 per unit, which intersects AVC at point B, the firm should:

Question

Exhibit 8-3 Cost per unit curves 
-If the price of the firm's product in Exhibit 8-3 is $1.50 per unit, which intersects AVC at point B, the firm should:

Quizplus · Accepted Answer

At a price of $1.50 per unit, the firm is earning revenue above its AVC (point B), but below its ATC. This means that the firm is making a pure economic loss in the short run, but it should continue operating for the time being as long as it is covering its variable costs. Shutting down temporarily or permanently would only result in additional losses. The firm may consider adjusting its production level or reducing its fixed costs to improve its profitability in the long run.

Exhibit 8-3 Cost Per Unit Curves