Consider the Following Data: Equilibrium Price = $40, Quantity of Output

question 89

Multiple Choice

Consider the following data: equilibrium price = $40, quantity of output produced = 100 units, average total cost = $47, and average variable cost = $37. What should the firm do and why?

• A)Shut down in the short run, because it is taking a loss of $700.
• B)Continue to produce in the short run, because price is greater than average variable cost.
• C)Shut down in the short run, because average variable cost is less than average total cost.
• D)Continue to produce in the short run, because firms are always stuck with having to produce in the short run.

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