A firm will shut down in the long-run if A)PAVC B)PATC

Name: A firm will shut down in the long-run if A)P>AVC B)P<ATC C)P=ATC D)P>ATC
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Question

​A firm will shut down in the long-run if
A)​P>AVC
B)P<ATC
C)P=ATC
D)​P>ATC

Quizplus · Accepted Answer

In the long-run, ATC includes all costs, including fixed costs. Thus, a firm will shut down in the long-run if it cannot cover its total costs, including fixed costs. This occurs when price (P) is lower than average total cost (ATC), resulting in a loss for the firm. Therefore, B is the correct answer.

​A Firm Will Shut Down in the Long-Run If

A Firm Will Shut Down in the Long-Run If