A profit-maximizing firm never produces where $P

Question

A profit-maximizing firm never produces where $P < A V C$

Quizplus · Accepted Answer

If a firm produces where price (P) is less than average variable cost (AVC), it will incur losses. This is because the firm's variable costs will be higher than the revenue it generates from selling its output. Therefore, a profit-maximizing firm will always produce where P is greater than or equal to AVC. If a firm produces where price (P) is less than average variable cost (AVC), then the firm would not be able to cover its variable costs and would be better off shutting down in the short run. Therefore, a profit-maximizing firm will never produce in that scenario.

A Profit-Maximizing Firm Never Produces Where P<AVCP < A V CP<AVC

A Profit-Maximizing Firm Never Produces Where $P < A V C$