A firm may decide to shut down in the short run
A)if profit maximization occurs at an output level where price is less than average variable cost
B)if profit maximization occurs at an output level where price is less than average total cost
C)profit maximization occurs at an output level where price is less than average total cost but greater than average variable cost
D)if profit maximization occurs at an output level where price is equal to average total cost and the firm does not foresee changes to the market price in the future

Question

Quizplus · Accepted Answer

A firm may decide to shut down in the short run if profit maximization occurs at an output level where price is less than average variable cost, as continuing production would lead to losses greater than fixed costs.

A Firm May Decide to Shut Down in the Short