Figure 14-7
-Refer to Figure 14-7.This firm will exit the market for any price on the line segment

Question

Figure 14-7 
-Refer to Figure 14-7.This firm will exit the market for any price on the line segment

Quizplus · Accepted Answer

The firm will exit the market where the price falls below average variable cost (AVC), which is the lowest point of the firm's AVC curve. The AVC curve intersects with the demand curve at point A. Therefore, any price on line segment AB will be below the AVC and the firm will exit the market. Prices on line segments BC and CD are above the AVC, so the firm will continue to operate in the short run.

Figure 14-7 -Refer to Figure 14-7.This Firm Will Exit the Market for the Market