The firm will continue to produce in the short run if P AVC.

Question

The firm will continue to produce in the short run if P <ATC and P > AVC.

Quizplus · Accepted Answer

In the short run, a firm will continue to produce if the price of the product is greater than the average variable cost (P > AVC). This is because the firm can cover its variable costs and some portion of its fixed costs. However, if the price is lower than the average total cost (P < ATC), the firm is not covering all of its costs and is better off shutting down in the short run.

The Firm Will Continue to Produce in the Short Run