In the short run a firm will produce zero output if ?
Correct answer: C. price is less than short run average variable cost
- A. price is greater than short run average total cost
- B. price is between short run average total cost and short run average variable cost
- C. price is less than short run average variable cost
- D. profit is zeroEconomics
Explanation
A firm shuts down in the short run when price falls below average variable cost, because it cannot cover even its variable operating expenses. Fixed costs must be paid regardless, so producing would increase the loss.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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