If a firm is currently producing where MR = MC and price = $24, AVC = $22, and ATC = $26, then in the long run this firm should
A) continue to operate at a loss
B) earn a positive profit
C) go out of business
D) increase output
E) decrease price

Question

Quizplus · Accepted Answer

In the long run, if the firm is producing where MR = MC but the price is less than ATC, it is making a loss. Since price ($24) is less than ATC ($26), the firm should go out of business in the long run if it cannot cover its total costs.

If a Firm Is Currently Producing Where MR = MC