Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?
A)Pa
B)Pb
C)Pc
D)Pd

Question

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?
A)Pa 
B)Pb 
C)Pc 
D)Pd

Quizplus · Accepted Answer

Price Pd corresponds to a firm earning negative economic profits in the short run and shutting down because it is below the average variable cost, leading to a situation where the firm cannot cover its variable costs.

Figure 14-2 Suppose a Firm Operating in a Competitive Market Has the Has