Question

In the short run, when does a firm NOT shut down?

a) Shutdown if TR < VC
b) Shutdown if TR/Q < VC/Q
c) Shutdown if P < Min AVC
d) Shutdown if P > Min AVC

Answer 1

In the short run, a firm does not shut down when the price (P) is greater than the minimum average variable cost (AVC).

Step-by-step explanation:

In the short run, a firm does not shut down when the price (P) is greater than the minimum average variable cost (AVC). If P > AVC, the firm continues to produce in the short run, even if it is making economic losses. This is because the firm is able to at least cover its variable costs with the revenue generated from selling its output.