If Price Is Above Average Variable Cost and Below Average

question 143

Multiple Choice

If price is above average variable cost and below average total cost, a profit-maximizing price taker should

• A) immediately shut down; failing to do so is contrary to the idea of profit maximization in a competitive market.
• B) continue producing as long as it expects the market price to rise above average total cost in the near future.
• C) attempt to push price upward by slowly reducing output.
• D) cut price so more units can be sold.