A firm sells 1000 units per week.It charges $70 per unit,the average variable costs are $25,and the average costs are $65.In the long run,the firm should
A)Shut down since price is greater than average cost
B)Continue operating price is higher than average cost,its making a profit
C)Continue operating as the firm is covering all the variable costs and some of the fixed costs
D)Shut-down because it is cost effective to pay off the remaining fixed costs

Question

​A firm sells 1000 units per week.It charges $70 per unit,the average variable costs are $25,and the average costs are $65.In the long run,the firm should
A)​Shut down since price is greater than average cost
B)Continue operating price is higher than average cost,its making a profit
C)Continue operating as the firm is covering all the variable costs and some of the fixed costs
D)​Shut-down because it is cost effective to pay off the remaining fixed costs

Quizplus · Accepted Answer

CB) The firm should continue operating because the price per unit ($70) is higher than the average cost ($65), indicating that the firm is making a profit. This profit can be used to cover fixed costs and contribute to net earnings.C) Since the price per unit ($70) is also significantly higher than the average variable costs ($25), the firm is covering all its variable costs and some of its fixed costs. This situation suggests that the firm is in a position to at least break even on its variable costs, making it financially sensible to continue operations in the short run.

​A Firm Sells 1000 Units Per Week

A Firm Sells 1000 Units Per Week