Kandee asked in Social ScienceEconomics · 7 years ago

State whether the firm should shut down or continue to operate in the short run?

I have absolutely no idea how to do this. Could someone show me the formula and walk me through a problem?

Given the following information, state whether the firm should shut down or continue

to operate in the short run.

a. Q=100; P=$10; AFC=$3; AVC=$4

b. Q=70; P=$5; AFC=$2; AVC=$7

c. Q=150; P=$7; AFC=$5; AVC=$6

1 Answer

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  • Anonymous
    7 years ago
    Favorite Answer

    B is correct because price cannot cover average variable cost. P<AVC.

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