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P M C ATC Av In the graph above, MC is the firms marginal cost curve, ATC is the firms average total cost curve, and AVC is
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Answer #1

Answer : the answer is option B.

If the firm faces a price level which lies between P1 and P2 then the firm faces loss. But as the price is above the AVC hence in short-run the firm will continue it's production after facing loss. But in long-run the firm will exit from the market. Therefore, option B is correct.

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P M C ATC Av In the graph above, MC is the firm's marginal cost curve, ATC is the firm's average total cost curve,...
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