Suppose the Minimum Average Total Cost (ATC) of a Firm

question 80

Multiple Choice

Suppose the minimum average total cost (ATC) of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC) was $.80 per unit. If the market price was $.75 per unit, a profit-seeking firm would

• A) shut down immediately.
• B) produce where MR = MC in the short run.
• C) shut down in the long run but remain in business in the short run.
• D) do both b and c.

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Definitions:

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