If the market price falls below the bottom of the firm's ATC curve:

Question

Quizplus · Accepted Answer

If the market price falls below the bottom of the firm's ATC curve, then the firm is not covering all of its costs, including both variable and fixed costs. This means that there is no level of output at which the firm can make a profit, and they may even choose to shut down in the short run. Therefore, option A is the correct answer. Option B is incorrect since the market price falling below the ATC curve would mean that the firm is not earning profits. Option C is not necessarily true since the market price only needs to be lower than the ATC curve, not the AVC curve specifically. Option D is also not true since option A is the correct answer.

If the Market Price Falls Below the Bottom of the Firm's