Consider the Following Data: Equilibrium Price = $40, Quantity of Output

Consider the following data: equilibrium price = $40, quantity of output produced = 100 units, average total cost = $47, and average variable cost = $37. What should the firm do and why?

A) Shut down in the short run, because it is taking a loss of $700.
B) Continue to produce in the short run, because price is greater than average variable cost.
C) Shut down in the short run, because average variable cost is less than average total cost.
D) Continue to produce in the short run, because firms are always stuck with having to produce in the short run.

Correct Answer:

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