If the price of a product is $12, its average total cost is $2 and its average variable cost is $15 at the profit-maximizing output level, in the short run the firm:

Question

If the price of a product is $12, its average total cost is $2 and its average variable cost is $15 at the profit-maximizing output level,  in the short run the firm:

Quizplus · Accepted Answer

The average variable cost ($15) is greater than the price ($12), so the firm is not covering all of its costs. This means the firm is experiencing a loss in the short run. Therefore, expanding output (choice A) or shutting down (choice D) would not be the best choice. The firm also may not be able to cover all of its total fixed costs (choice B), which contributes to the loss.

If the Price of a Product Is $12, Its Average