Exhibit 12-5 Refer to Exhibit 12-5.In the short run,if the market price falls below ____,the firm should shut down.

Question

Exhibit 12-5  Refer to Exhibit 12-5.In the short run,if the market price falls below ____,the firm should shut down.

Quizplus · Accepted Answer

In the short run, the firm should shut down if the price falls below the minimum average variable cost, which is $30 in this case. At a price lower than that, the firm would not be able to cover its variable costs, and shutting down would minimize its losses. Therefore, the best choice is C.