Asked by Everika Martinnez on Jul 05, 2024
Verified
In the short run, a purely competitive seller will shut down if product price
A) equals average revenue.
B) is greater than MC.
C) is less than AVC.
D) is less than ATC.
AVC
Average variable cost refers to the division of the total variable expenses by the quantity of goods produced.
ATC
Average Total Cost, which refers to the total cost per unit of output, including both fixed and variable costs.
MC
In economics, MC stands for Marginal Cost, which is the cost of producing one additional unit of a good or service.
- Identify the specific situations that dictate whether an enterprise should maintain its production processes or halt them in the short-term.
Verified Answer
AJ
Andela JovovicJul 10, 2024
Final Answer :
C
Explanation :
In the short run, a purely competitive seller will shut down if the product price is less than the average variable cost (AVC). This is because, at prices below AVC, the firm cannot cover its variable costs, and it would minimize its losses by ceasing production.
Learning Objectives
- Identify the specific situations that dictate whether an enterprise should maintain its production processes or halt them in the short-term.