When price is below average variable cost, a firm in a competitive market will
A)shut down and incur fixed costs.
B)shut down and incur both variable and fixed costs.
C)continue to operate as long as average revenue exceeds marginal cost.
D)continue to operate as long as average revenue exceeds average fixed cost.

Question

Quizplus · Accepted Answer

When the price is below average variable cost, the firm cannot cover its variable costs and should shut down to minimize losses, incurring only fixed costs.

When Price Is Below Average Variable Cost, a Firm in a Competitive