Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Reporting And Analysis

Authors: Lawrence Revsine, Daniel Collins

5th Edition

0078110866, 978-0078110863

More Books

Students also viewed these Economics questions