A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than
A)average variable cost.
B)average total cost.
C)average fixed cost.
D)marginal cost.

Question

Quizplus · Accepted Answer

A firm should shut down in the short run if the average revenue (price) it receives is less than its average variable cost, as it cannot cover its variable costs, leading to a loss greater than its fixed costs if it continues operating.

A Profit-Maximizing Firm Should Shut Down in the Short Run