Question

A firm will shut down in long-run if the a. Firm is making zero economic profits....

A firm will shut down in long-run if the

a. Firm is making zero economic profits.

b. Price is anywhere above the the minimum average variable cost (AVC)

c. Price is above the minimum average total cost (ATC)

d. Price is equal to the minimum average total cost (ATC)

e. Price is anywhere below the minimum average total cost (ATC)

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Answer #1

Profit = (P-ATC)*Q

The firm will make loss when price is below ATC, so firm will shut down if price is below ATC

option e is the correct answer ie. Price is anywhere below the minimum average total cost (ATC)

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