Question
Sophie has a business where she sells DVDs for $15 each. The average variable cost of production is $10 per unit. The average total cost
Sophie has a business where she sells DVDs for $15 each. The average variable cost of production is $10 per unit. The average total cost of production is $16. What should she do in the short run?
a. She should continue operating since the business is earning an economic profit.b. She should shut down because the sales are NOT covering the average total cost of production.c. She should shut down since the business is earning zero economic profit.d. She should continue producing even though the sale price is NOT covering the average total cost of production
What can you conclude about a firm in the short run when its price is less than its average total cost?
a. The firm should shut down.b. The firm should exit the market.c. The firm is suffering an economic loss.d. The firm is earning an economic profit.What can you conclude about a firm in the short run when its price is less than its average total cost?
a. The firm should shut down.b. The firm should exit the market.c. The firm is suffering an economic loss.d. The firm is earning an economic profit.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started