A Firm Will Shut Down in the Long-Run If the

question 109

Multiple Choice

A firm will shut down in the long-run if the

• A) price is above the minimum average total cost (ATC).
• B) price is equal to the minimum average total cost (ATC).
• C) price is anywhere above the minimum average variable cost (AVC).
• D) price is anywhere below the minimum average total cost (ATC).
• E) firm is making zero economic profits.

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Definitions:

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total amount of output produced, indicating the cost per unit of output.

Marginal Cost

The production cost for one more unit of a product.

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good varies.

Average Total Cost

The per unit cost of production, computed by dividing the total cost of production by the total quantity of output.