Figure 14-1
The graph below depicts the cost structure for a firm in a competitive market.

-Refer to Figure 14-1.When price falls from P₃ to P₁,the firm finds that

Question

Figure 14-1
The graph below depicts the cost structure for a firm in a competitive market.
 
-Refer to Figure 14-1.When price falls from P₃ to P₁,the firm finds that

Quizplus · Accepted Answer

When the price falls to P₁, it is likely below the average variable cost, indicating that the firm cannot cover its variable costs and should shut down immediately to minimize losses.

Figure 14-1 The Graph Below Depicts the Cost Structure for a Firm