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The short-run shutdown rule is to shut down if: A
The short-run shutdown rule is to shut down if:
A. P > AVC.
B. P < AVC.
C. P > ATC.
D. P < ATC.
Expert Solution
Option B. P < AVC is correct.
This is a correct option because a firm will find it profitable to operate till the point when price is equal to average variable cost or price exceeds average variable cost. So if the price falls below average variable cost then the firm will have to shut down in the short run.
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