What should the firm do if there is no possible output where the price would at least be equal to average variable costs?
A) The firm should lower the price.
B) The firm should raise the price.
C) The firm should shut down in the short run.
D) The firm should increase production.
E) The firm should decrease production.

Question

Quizplus · Accepted Answer

If there is no possible output where the price would at least be equal to average variable costs, it means that the firm is unable to cover its variable costs with the revenue earned from selling its products. In such a scenario, it is best for the firm to shut down in the short run, as continuing to produce and sell at a loss would only lead to further losses. However, the firm may consider re-entering the market in the long run if it believes that the demand conditions or cost structure may change in its favor.

What Should the Firm Do If There Is No Possible