Suppose a paper mill in Quebec is shut down by its owner, even though the plant and equipment are in excellent shape and the paper is of top quality. What could explain this?
A) The price the firm is receiving for the paper is less than its average variable cost.
B) The owner is minimizing its production costs.
C) The price the firm is receiving is less than the average total cost.
D) The price the firm is receiving for the paper is greater than its marginal cost.
E) The paper mill must not have been operating at its profit- maximizing level of output.

Question

Quizplus · Accepted Answer

If the price the firm is receiving for the paper is less than its average variable cost, the firm would be unable to cover its variable costs and would shut down to minimize losses.

Suppose a Paper Mill in Quebec Is Shut Down by Its