Figure 7-D
-Refer to Figure 7-D.In the short run, if the market price falls to $40 per unit, the firm should:

Question

Figure 7-D 
-Refer to Figure 7-D.In the short run, if the market price falls to $40 per unit, the firm should:

Quizplus · Accepted Answer

In the short run, the firm should continue to operate temporarily, because it is minimizing losses by doing so. This is because the market price of $40 is below the minimum average variable cost (AVC), but above the minimum average total cost (ATC). Therefore, the firm is not covering all of its costs, but it is still covering some of its fixed costs. By continuing to operate, the firm can at least cover some of its costs and minimize losses in the short run.

Figure 7-D -Refer to Figure 7-D.In the Short Run, If the Market