In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below
A)marginal cost.
B)average cost.
C)average fixed cost.
D)average variable cost.

Question

Quizplus · Accepted Answer

In the short run, a profit-maximizing firm will shut down if the price falls below its average variable cost, as it would not be able to cover its variable costs of production.

In the Standard Model of Pure Competition, a Profit-Maximizing Firm