Question

Mrs. Sarr operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Sarr should shut down her business in the short run but continue to operate in the long run.

A. True
B. False

Answer 1

B. False

Step-by-step explanation:

Given that

Current market price = $8.10

Average variable cost = $8

And, the average total cost = $8.25

As we can see that the current market price is more than the average variable cost so it would be operate in the short run

Also the total cost is more than the current market price so it would be shut down in the long run

Therefore the given statement is false