If price exceeds average variable cost but is less than average total cost, a firm
A)should further differentiate its product.
B)should stay in business for a while longer until its fixed costs expire.
C)is making some profit but less than maximum profit.
D)should shut down.

Question

Quizplus · Accepted Answer

When price exceeds average variable cost but is less than average total cost, the firm can cover its variable costs and some of its fixed costs, so it should continue operating in the short run to minimize losses until fixed costs expire.

If Price Exceeds Average Variable Cost but Is Less Than