Consider the Following Data: Equilibrium Price = $8

Consider the following data: equilibrium price = $8.50,quantity of output produced = 100 units,average total cost = $10,and average variable cost = $9.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 it will be taking a loss of $100.
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.
E) none of the above

Correct Answer:

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