A firm will choose to operate rather than shut down as long as
A) price is greater than or equal to AFC.
B) AFC is greater than AVC.
C) price is greater than or equal to AVC.
D) AVC is greater than MC.

Question

Quizplus · Accepted Answer

A firm will choose to operate in the short run as long as the price it receives for its product is greater than or equal to its average variable cost (AVC). This is because, in the short run, the firm must cover its variable costs to justify remaining in operation. Fixed costs are sunk in the short run and do not affect the shutdown decision.

A Firm Will Choose to Operate Rather Than Shut Down