Exhibit 7-3 Cost per unit curves If the price of the firm's product in Exhibit 7-3 is $1.50 per unit, which intersects AVC at point B, the firm should:

Question

Exhibit 7-3  Cost per unit curves  If the price of the firm's product in Exhibit 7-3 is $1.50 per unit, which intersects AVC at point B, the firm should:

Quizplus · Accepted Answer

At the given price of $1.50 per unit, the firm is producing at point B, where the AVC curve intersects. This means that the firm is covering its variable costs but not its fixed costs, and is making a pure economic loss. However, the firm should continue to operate for the time being and try to cover as much of its fixed costs as possible, because shutting down temporarily would still incur fixed costs and shutting down permanently would result in a loss of potential future profits.

Exhibit 7-3 Cost Per Unit Curves If the Price of the Firm's