The shutdown condition-the point where the company finds it no longer viable to produce and sell a product-for a competitive firm,in the short run,is where price is
A)less than marginal revenue.
B)less than short-run average total cost.
C)greater than marginal revenue.
D)less than average variable cost.

Question

Quizplus · Accepted Answer

In the short run, a competitive firm will shut down if the price of the product falls below its average variable cost. This is because, at any price below average variable cost, the firm would not be able to cover its variable costs even if it were to produce, leading to a situation where its losses would be greater than its fixed costs.

The Shutdown Condition-The Point Where the Company Finds It No