If, over the short run, a pure competitor's and a monopolist's price were less than average variable cost at the output where marginal cost equals marginal revenue:
A) both would minimize their loss by shutting down.
B) both would minimize their loss by continuing to produce.
C) the pure competitor would minimize its loss by shutting down, and the monopolist would minimize its loss by continuing to produce.
D) the pure competitor would minimize its loss by continuing to produce, and the monopolist would minimize its loss by shutting down.

Question

Quizplus · Accepted Answer

If the price is less than the average variable cost at the output where marginal cost equals marginal revenue, both a pure competitor and a monopolist would minimize their losses by shutting down. Continuing production would mean incurring losses greater than their fixed costs.

If, Over the Short Run, a Pure Competitor's and a Monopolist's