A seller whose price is less than average total cost but greater than average variable cost will minimize its loss by producing rather than by shutting down.

Question

Quizplus · Accepted Answer

When the price is less than the average total cost but greater than the average variable cost, the firm covers all its variable costs and contributes to covering some of its fixed costs. Shutting down would mean not covering any fixed costs, leading to a higher loss.

A Seller Whose Price Is Less Than Average Total Cost