Question

A competitive firm maximizes profit at an output level of 500 units, market price is $36.00, and ATC is $36.95. At what range of AVC values for an output level of 500 would the firm choose not to shut down in the short run?

Answer 1

range of average variable cost values < $36.00

Step-by-step explanation:

given data

maximizes profit output level = 500 units

market price = $36.00

ATC = $36.95

solution

as here firm will continue to produce as long as total revenue cover

total variable costs or price per unit is less than or equal to the average variable cost (AVC)

(AR = AVC)

so range of average variable cost values < $36.00