According to the shutdown rule,a firm should produce no output in the short run if
A)price is below minimum average total cost.
B)price is above minimum average total cost.
C)total revenues are lower than total fixed costs.
D)price is below minimum average variable costs.

Question

Quizplus · Accepted Answer

The shutdown rule states that a firm should produce no output in the short run if price is below minimum average variable cost (AVC). This is because if the price is below the AVC, the firm is not even covering its variable costs and continuing to produce would only result in larger losses. Therefore, it is better to shut down in the short run and minimize losses.

According to the Shutdown Rule,a Firm Should Produce No Output