in the short run the firm should shut down when course hero average fixed cost

Should a firm shut down in the short run?

10. A firm should shut down in the short run if it is not covering its: A. Variable cost B. Fixed cost C. Total cost D. Explicit cost (money outlays) Answer & Explanation. Answer: Option A. ... Course Hero is not sponsored or endorsed by any college or university. ...

What should a firm do to avoid its variable cost?

True or false: If marginal cost lies below average fixed cost, the firm should shut down in the short run. Explain. False. The firm should shut down if and only if the price is below average variable costs (AVC). AFC have nothing to do with the firm’s decision to shu t down in the short-run since the firm pays FC irrespective of whether it is operating or not.

What is the cost of production of a perfectly competitive firm?

If price falls below average variable cost, the firm will shut down in the short run, reducing output to zero. The lowest point on the average variable cost curve is called the shutdown point. The firm’s supply curve in the short run is its marginal cost curve for prices greater than the minimum average variable cost.

What is always true at the quantity where average total cost equals?

Apr 30, 2021 · True The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions. True A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 ...

What happens if a firm shuts down in the short run?

Should increase output. Should shut down. Should shut down. If a firm shuts down in the short run, it avoids its variable cost but not its fixed cost.

What happens when a firm finds its market price is below its minimum average variable cost?

Its loss equals its fixed cost. When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell: Nothing at all; the firm shuts down.

What does it mean when a firm breaks even?

The firm breaks even. If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm: Is earning a profit. Is incurring a loss.