Exhibit 16 Short-run cost curves for a competitive firm

-In Exhibit 7-16,the firm should shut down in the short run if the market price of its product falls below:

Question

Exhibit 16 Short-run cost curves for a competitive firm
 
-In Exhibit 7-16,the firm should shut down in the short run if the market price of its product falls below:

Quizplus · Accepted Answer

In the short run, a firm should shut down if the market price falls below its minimum average variable cost (AVC), which is $30 per unit in this exhibit. If the price falls below this, the firm will not be able to cover its variable costs and will incur greater losses by continuing to produce. Thus, the best choice is B, $30 per unit.

Exhibit 16 Short-Run Cost Curves for a Competitive Firm