If the price of dynamite drops to $10, should Acme Dynamite continue to operate in the short run?

Question

Quizplus · Accepted Answer

In the short run, firms should continue to operate if price is greater than average variable cost, because at least some of the variable costs can be covered. In this case, if the price of dynamite drops to $10 and the average variable cost per unit is less than $10, then Acme Dynamite should continue to operate. While the price may be less than average total cost, in the short run, fixed costs cannot be changed so they should only consider variable costs when deciding whether to continue operations.

If the Price of Dynamite Drops to $10, Should Acme