Asked by
Rebekka Reynolds
on Nov 16, 2024
Verified
In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.
Average Total Cost
The total cost of production divided by the number of goods produced, representing the per-unit cost of production.
Market Price
The current price at which an asset or service can be bought or sold in a given market.
Shut Down
A short-term decision by a firm to cease production due to market conditions, not covering variable costs in the short run.
- Understand the principles of firm shutdown and exit in the short and long run.
Verified Answer
FV
Learning Objectives
- Understand the principles of firm shutdown and exit in the short and long run.