The Shutdown Rule for a Firm in a Perfectly Competitive

question 29

Multiple Choice

The shutdown rule for a firm in a perfectly competitive industry is that the firm should cease production if

• A) P < MC.
• B) P < ATC.
• C) P < AVC.
• D) P < AFC.

---

Definitions:

Initial Endowment

The initial distribution of income, wealth, or resources among individuals or groups in an economy.

Relative Prices

The price of one good or service compared to another, often indicating their opportunity cost or trade-off.

Utility Function

An economic concept that quantifies an individual's satisfaction or happiness, derived from consuming goods and services, represented through a formula.

Indifference Curves

A graph representing different bundles of goods between which a consumer is indifferent, showing the combinations that yield the same level of utility to the consumer.