Asked by Maggie Desmond on May 23, 2024
Verified
A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than
A) average variable cost.
B) average total cost.
C) average fixed cost.
D) marginal cost.
Average Revenue
The amount of money received by a firm per unit of output sold.
Average Variable Cost
The total variable costs divided by the quantity of output, representing the variable cost per unit of output produced.
Average Total Cost
The total cost of production divided by the total output or quantity produced, indicating the cost per unit of output.
- Analyze the decision-making process of firms regarding whether to continue operation or shut down in the short run.
Verified Answer
HK
Holly KovalMay 28, 2024
Final Answer :
A
Explanation :
A firm should shut down in the short run if the average revenue (price) it receives is less than its average variable cost, as it cannot cover its variable costs, leading to a loss greater than its fixed costs if it continues operating.
Learning Objectives
- Analyze the decision-making process of firms regarding whether to continue operation or shut down in the short run.