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Would a profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short run? ()
Would a profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short run? () A. No, a firm should never produce if its price falls below average total cost. B. Yes, but only if price stayed above average variable cost. C. Yes, but only if price was below average variable cost. () D. Yes, firms should keep producing until price falls below marginal cost. The graph on the right shows the average total cost (ATC), average variable cost (AVC), marginal cost (MC), and marginal revenue (MR) for a firm. If the firm produces where marginal revenue equals marginal cost, what would be the fixed costs the firm would still have to pay if it shut down? 1.) Using the rectangle drawing tool, highlight the area on the graph that represents the fixed costs the firm must pay even if it shuts down. Carefully follow the instructions above and only draw the required object. Price o 20 0 18 MC 16 14 ATC ave 12 10 0 2 4 6 8 10 12 14 16 18 20 Quantity
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