If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

Question

Quizplus · Accepted Answer

If the market price is greater than or equal to the minimum of AVC, it means that the firm can cover its variable costs and avoid immediate bankruptcy. However, if the market price is below the minimum average cost (AC), the firm is not covering its total costs, including both fixed and variable costs, and is making a loss. In this scenario, the firm may choose to continue operating in the short run, in order to cover some of its fixed costs, and minimize its losses. Therefore, Option B is the correct answer.

If Market Price Is Greater Than or Equal to the Minimum