The Market Price Has Fallen Below a Firm's Average Total

question 9

Multiple Choice

The market price has fallen below a firm's average total costs, and the firm is now earning a loss. What is the best action for the firm to take in the short run?

• A)Stay open as long as price is greater than average variable costs.
• B)Shut down immediately and pay fixed costs only.
• C)Stay open as long as total revenue is greater than fixed costs.
• D)Shut down as long as price is greater than average variable costs.

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Definitions:

Helping Context

An environment or situation specifically designed or conducive to assisting, supporting, or aiding individuals.

Formulating

The action of creating or devising a strategy or plan, often involving the assembly or arrangement of ideas or components in a meaningful or coherent manner.

Behavioral Excesses

Actions or behaviors that occur too frequently or intensely, often causing problems or distress.

Deficits

Shortfalls or deficiencies in a context, such as budget deficits where expenses exceed revenues or in skills where current abilities do not meet a required standard.