Alpha, Inc. knows that its lowest average variable cost is $400 and its lowest average total cost is $1,000. What price would make Alpha, Inc. willing to produce in the short run but not in the long run?

Question

Quizplus · Accepted Answer

In the short run, a firm is willing to produce as long as the price covers its average variable costs, which is $400 for Alpha, Inc. Therefore, any price above $400 would make the firm willing to produce in the short run. However, in the long run, the firm would not produce unless the price also covers its average total costs, which is $1,000. Thus, a price of $420 would satisfy the condition of being above the average variable cost but below the average total cost, making it the correct choice.