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:

Afferent

Afferent refers to the conveyance of signals or nerve impulses towards the central nervous system from the periphery or from lower to higher centers within the CNS, commonly used in the context of sensory neurons.

Efferent

Relating to nerve fibers that carry impulses away from the central nervous system to effectors such as muscles or glands.

Cerebrospinal Fluid

A clear, colorless body fluid found in the brain and spinal cord, acting as a cushion and nutrient carrier.