Question

Your firm has a price of ​$5​, an average total cost of ​$7​, and an average variable cost of ​$4. In the short​ run, you should ________(operate/shut down) because ________exceeds ________ average variable cost price . In the long​ run, you should _________(stay in/exit) the market because ________ average total cost price exceeds__________average variable cost price average total cost .

Answer 1

Explanation:

Given that a firm has a price of ​$5​, an average total cost of ​$7​, and an average variable cost of ​$4

Price = 5

Var cost = 4

Contribution = 1 dollar per unit

Since contribution is positive, there is scope for getting profit by increasing production.

In the short​ run, you should __operate______(operate/shut down) because __Price______exceeds ________ average variable cost price . In the long​ run, you should __exit______(stay in/exit) the market because ________ average total cost price exceeds____price.______average variable cost price average total cost