In the short run, a firm operating in a competitive industry will shut down if price is
A)less than average total cost.
B)less than average variable cost.
C)greater than average variable cost but less than average total cost.
D)greater than marginal cost.

Question

Quizplus · Accepted Answer

In the short run, a firm will shut down if the price is less than the average variable cost, as the firm will not even be able to cover its variable costs and would incur further losses if it continues to operate. If the price is greater than the average variable cost but less than the average total cost, the firm will operate but incur losses. Therefore, option B is the best choice.

In the Short Run, a Firm Operating in a Competitive