-In the above figure, if the firm is producing at Q3 and charging a price of P3, it should
A) increase output and decrease price.
B) decrease output and increase price.
C) not change output or price.
D) shut down.

Question

-In the above figure, if the firm is producing at Q3 and charging a price of P3, it should
A) increase output and decrease price. 
B) decrease output and increase price. 
C) not change output or price. 
D) shut down.

Quizplus · Accepted Answer

If a firm is producing at Q3 and charging a price of P3, it is operating below its average total cost (ATC), meaning it is not covering its total costs. To move towards profitability or minimize losses, the firm should decrease output to a level where price is closer to or above ATC and increase the price to cover its costs more effectively.

-In the Above Figure, If the Firm Is Producing at Q3