Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run?
A)P

Question

Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run?
A)P < MC
B)P = MC < AC
C)P < AVC
D)P = MR

Quizplus · Accepted Answer

If the market price falls below the average variable cost (AVC), the company would not be able to cover its variable costs and would therefore shut down in the short run. In this case, it is better to minimize losses by shutting down temporarily rather than continuing operations and incurring greater losses.

Which of the Following Conditions Would Definitely Cause a Perfectly