Consider the following data: equilibrium price = $7.50, quantity of output produced100 units, average total cost = $9, and average variable cost = $8. What will thefirm do and why?=a. Shut down in the short run, because price is below average variable cost.b. Shut down in the short run, because price is below average total cost.c. Continue to produce in the short run, because price is greater than averagevariable cost.d. Continue to produce in the short run, because firms are always stuck withhaving to produce in the short run.

The notion concentrates upon a company's short-term production decisions, particularly when…

Answered: Consider the following = 100 units,…

Consider the following = 100 units, average to firm do and why? a. Shut down in th b. Shut down in t c. Continue to pro variable cost. d. Continue to pro having to produce in

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.7IP

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Question

Consider the following data: equilibrium price = $7.50, quantity of output produced
100 units, average total cost = $9, and average variable cost = $8. What will the
firm do and why?
=
a. Shut down in the short run, because price is below average variable cost.
b. Shut down in the short run, because price is below average total cost.
c. Continue to produce in the short run, because price is greater than average
variable cost.
d. Continue to produce in the short run, because firms are always stuck with
having to produce in the short run.

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