In the short run, a profit-maximizing firm in a price-taker market will definitely stop production if
A) economic profit is zero.
B) price falls below average total cost.
C) price is less than average variable cost.
D) it cannot completely cover its fixed costs.

Question

Quizplus · Accepted Answer

In the short run, a firm will stop production if the price falls below the average variable cost because it cannot cover its variable costs, leading to greater losses than shutting down.

In the Short Run, a Profit-Maximizing Firm in a Price-Taker