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Table 14-15 Quantity Total Cost $3 $8 $10 $12 $20 $35 $50 Refer to Table 14-15. What is the lowest price at which this firm w

Can you please explain how to arrive at the answer? Thank you.

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Answer #1

Option (a) $3.

In the short run, the firm can operate without producing any quantity at all, that is, it can produce 0 quantity because it still has to bear the fixed cost of production.

Fixed costs are the expenses which has to be incurred irrespective of any business activities by the firm. So, the costs that the firm is spending when there is no production is the fixed cost which is $3 in this case. So, this is the lowest price at which this firm would operate in the short run.

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