A firm will shut down in the long-run if the
A) price is above the minimum average total cost (ATC).
B) price is equal to the minimum average total cost (ATC).
C) price is anywhere above the minimum average variable cost (AVC).
D) price is anywhere below the minimum average total cost (ATC).
E) firm is making zero economic profits.

Question

Quizplus · Accepted Answer

In the long-run, a firm will shut down if it is unable to cover all its costs, including both variable and fixed costs. This means that the price must be above the minimum average total cost (ATC) to cover all costs in the long-run. If the price is anywhere below the minimum ATC, the firm will be operating at a loss and will eventually shut down. Therefore, the best choice is D, as it specifies price being below the minimum ATC, which indicates that the firm is making losses and will eventually shut down in the long-run.

A Firm Will Shut Down in the Long-Run If the