A firm sells 300,000 units per week.It charges $ 35 per unit,the average variable costs are $40,and the average costs are $55.At what price does the firm consider shutting-down in the short run?

Question

Quizplus · Accepted Answer

In the short run, a firm considers shutting down if the price falls below the average variable cost. In this case, the average variable cost is $40. Therefore, if the price falls below $40, the firm will shut down. The only option that falls below $40 is B, which is $40. Hence, the firm will consider shutting down if the price falls below $40.

A Firm Sells 300,000 Units Per Week