For a particular competitive firm, the minimum value of average variable cost (AVC) is $12 and is reached when 200 units of output are produced. For the same firm, the minimum value of average total cost (ATC) is $15 and is reached when 230 units of output are produced. Which of the following statements is correct?
A)In the short run, the firm will shut down if the price of its product is $11.
B)In the long run, the firm will shut down if the price of its product is $14.
C)If the price of its product is $12, then the firm's loss if it produces 200 units of output is the same as its loss if it shuts down.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The firm will shut down if the price of its product is less than the minimum of AVC, which is $12. The firm will also shut down if the price of its product is less than the minimum of ATC, which is $15. If the price of its product is $12, then the firm's loss if it produces 200 units of output is the same as its loss if it shuts down.

For a Particular Competitive Firm, the Minimum Value of Average