A monopolist should shut down in the short run if
A)price is less than average variable cost
B)price is greater than average total cost
C)marginal revenue equals marginal cost
D)marginal revenue is less than marginal cost
E)price exceeds average fixed cost

Question

Quizplus · Accepted Answer

A monopolist should shut down in the short run if the price is less than the average variable cost. This is because, in the short run, the fixed costs are sunk and cannot be recovered. Therefore, if the price is lower than the variable costs, the firm would incur losses greater than the fixed costs, and shutting down would be the best option.

A Monopolist Should Shut Down in the Short Run If