Question

A competitive firm maximizes profit at an output level of 500 units, market price is $15.00, and ATC is $15.75. At what range of AVC values for an output level of 500 would the firm choose not to shut down in the short run?

Answer 1

Answer:

AVC < $15.00

Explanation:

A firm will continue to produce as long as total revenue covers total variable costs or price per unit > or equal to average variable cost (AR = AVC).