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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

In the short run, if a firm finds that its price (P) is less than its average total cost (ATC), should it shut down its operation?

To determine

Explain whether the firm continues its production or shuts down the production.

Explanation

A firm’s decision regarding shut down or continue the production depends upon the relationship between the price level in the market and the average variable cost. In the short run, if the price charged by firm is above the average variable cost (P>AVC<

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