The price-taker firm should discontinue production immediately if
A) the market price exceeds the firm's average total costs.
B) the market price is less than the firm's average variable costs.
C) the market price is less than the firm's average total costs but greater than its average variable cost.
D) its accounting statement indicates that it is suffering losses.

Question

Quizplus · Accepted Answer

A price-taker firm should discontinue production if the market price is less than the firm's average variable costs, as it cannot cover its variable costs and would incur greater losses by continuing production.

The Price-Taker Firm Should Discontinue Production Immediately If