Multiple Choice
The price for a pair of edible underpants is \$50. In the short-run, the firm should:
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11. Perfect Competition
Short Run Shutdown Decision
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
What is the least amount of output, assuming the firm does not shut down?
A
5 units
B
8 units
C
10 units
D
11 units
Verified step by step guidance1
Identify the key curves on the graph: Average Total Cost (ATC), Average Variable Cost (AVC), and Marginal Cost (MC).
Understand that the firm will not shut down as long as it can cover its average variable costs (AVC). This means the price must be at least equal to the minimum point on the AVC curve.
Locate the minimum point on the AVC curve on the graph. This is the point where the AVC is at its lowest, which corresponds to a specific quantity of output.
Determine the quantity of output at which the price equals the minimum AVC. This is the least amount of output the firm can produce without shutting down.
From the graph, observe that the minimum point on the AVC curve corresponds to a quantity of 8 units. Therefore, the least amount of output, assuming the firm does not shut down, is 8 units.
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