If a firm's average total cost is less than price where MR = MC
A)the firm should shut down.
B)the firm should raise its price.
C)the firm should continue to produce the output it is producing.
D)the firm should cut back on its output to lower its cost.

Question

Quizplus · Accepted Answer

If a firm's average total cost is less than price where MR = MC, it means that the firm is making a profit on each unit produced. Therefore, the firm should continue to produce the output it is producing to maximize its profit. Shutting down would only result in losses, raising its price may result in lower demand and cutting back on its output may result in not utilizing its production capacity fully.

If a Firm's Average Total Cost Is Less Than Price