Question

If price is between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is :
continue operating, but plan to go out of business.
shut down immediately, but not liquidate the business.
lower prices to gain revenue from extra volume. raise prices.
shut down immediately and liquidate the business.

Answer 1

Answer:Option (A) is correct.

Explanation:

Correct Option: Continue operating, but plan to go out of business.

When the price of the output is between the average variable cost and average total cost then the firms is earning the operating profits, therefore, it doesn't shutdown its operations and remains in the market.

If this will continue then soon firms decided to go out of the market because it doesn't give much to the firms.