Exhibit 22-4

Refer to Exhibit 22-4. Where can you find the lowest price that will motivate the firm to produce Q₁ in the short run?

Question

Exhibit 22-4 Refer to Exhibit 22-4. Where can you find the lowest price that will motivate the firm to produce Q₁ in the short run?

Quizplus · Accepted Answer

The lowest price that will motivate the firm to produce Q₁ in the short run is where it intersects with the AVC curve (horizontal line running to "AVC"). This is because at that price, the firm will be able to cover its variable costs and make a contribution towards its fixed costs. Any price below this, such as at the horizontal line running to "ATC" or $0, would not be sufficient to cover even the variable costs and the firm would choose to shut down in the short run.

Exhibit 22-4 ​ Refer to Exhibit 22-4. Where Can You Find the Lowest

Exhibit 22-4 Refer to Exhibit 22-4. Where Can You Find the Lowest