A firm will shut down in the short-run if A)PAVC B)P

Name: A firm will shut down in the short-run if A)P>AVC B)P<AVC C)Profits<0 D)P<ATC
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Question

​A firm will shut down in the short-run if
A)​P>AVC
B)P<AVC
C)Profits<0
D)​P<ATC

Quizplus · Accepted Answer

In the short run, a firm will shut down if the price (P) is less than the average variable cost (AVC) at the profit-maximizing quantity. This is because the firm would not be able to cover its variable costs, let alone its fixed costs, and would therefore be operating at a loss. Option B is the only one that meets this condition.

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

A Firm Will Shut Down in the Short-Run If