Suppose That Price Is Below the Minimum Average Total Cost

question 152

Multiple Choice

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) , and the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would:

• A) immediately shut down and get out of the industry.
• B) continue to produce a quantity such that marginal revenue equals marginal cost.
• C) shut down temporarily, in hopes of restarting in the near future.
• D) cut price and expand output in hopes of achieving economies of scale

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Definitions:

75th Percentile

A value below which 75% of the observations in a group fall, often used to measure the upper quartile.

Coefficient Of Variation

A standardized measure of the dispersion of a probability distribution or frequency distribution, often used to compare the degree of variation between different datasets.

Ages

Quantitative measures representing lengths of time that entities, typically individuals, have existed from birth to a specific reference point.

Annual Percentage Rates

The annual rate charged for borrowing or earned through an investment, adjusted for the effect of compounding.