Refer to Figure 15.4. If The Hand Made Shirt Shop is monopolistically competitive, what is the maximum level of average variable cost that would lead to the firm continuing to operate at the profit-maximizing level in the short run?

A) $18
B) $22
C) $23
D) $25

In a monopolistically competitive market, a firm will continue to operate in the short run as long as it can cover its average variable costs (AVC). The profit-maximizing level of output is determined where marginal cost (MC) equals marginal revenue (MR). Without seeing Figure 15.4, we can infer that the maximum level of AVC that allows the firm to continue operating must be at or below the price it charges at the profit-maximizing output level, but since specific details from the figure are missing, the correct answer is based on the premise of covering AVC to avoid losses. Given the options, $23 is chosen as it represents a plausible maximum AVC under typical circumstances for a firm to keep operating in the short run, assuming it is less than or equal to the price at the profit-maximizing quantity.