In the short run,a monopoly will stop producing if: A)P ATC.

Question

In the short run,a monopoly will stop producing if: A)P < ATC. B)P < AVC. C)P > MR. D)P > ATC.

Quizplus · Accepted Answer

A monopolist will continue to produce in the short run as long as price is greater than or equal to average variable cost (P >= AVC). If price falls below AVC, the firm cannot cover its variable costs and will shut down production. However, if price is above AVC but still below average total cost (P < ATC), the firm may continue to produce in the short run, but will be incurring losses. Therefore, B is the correct choice as it represents the minimum price necessary for the monopolist to continue production in the short run.

In the Short Run,a Monopoly Will Stop Producing If