Question

The state of Maine has a very active lobster industry, which harvests lobsters during the summer months. During the rest of the year, lobsters can be obtained from other parts of the world but at a much higher (input) price. Maine is also full of "lobster shacks," roadside restaurants serving lobster dishes that are open only during the summer. Why is it optimal for lobster shacks to operate only during the summer? Because outside the summer ____ are above lobster dish prices, so that they should shut down.

Answer 1

Average variable cost

Step-by-step explanation:

If in the short run, price is below average variable cost, a firm should shut down. This means the lobster sharks should close down when it is not summer.

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