A monopoly will shut down in the short run when
A)the average variable cost curve is above the demand curve.
B)the marginal cost curve is above the demand curve.
C)the average total cost curve is above the demand curve.
D)the marginal revenue curve is horizontal.
E)marginal cost is negative.

Question

Quizplus · Accepted Answer

In the short run, a monopoly will shut down if the price it can charge is below its average variable costs. This means that its average variable cost curve is above the demand curve. If it continues to operate, it will be losing money on every unit produced and sold, so it is better off shutting down to minimize its losses.

A Monopoly Will Shut Down in the Short Run When