**Question 8****7.3.2 According to the figure below, a firm would shut down in the short run if the price is**[Graph Explanation]The graph includes three curves labeled as MC (Marginal Cost), ATC (Average Total Cost), and AVC (Average Variable Cost) plotted against Quantity on the x-axis and Price/Cost on the y-axis. Two horizontal lines are drawn at price levels $5 and $4.- The MC curve is upward sloping, indicating increasing marginal costs with quantity.- The ATC curve is above the AVC curve, both showing a typical U-shape, with the ATC curve being higher than the AVC.- The horizontal line at $5 intersects above the AVC curve.- The horizontal line at $4 intersects at a point that appears below the AVC curve.From the graph, a firm should shut down if the market price falls below the AVC curve, which aligns with the $4 price level.**Options:**- anywhere below $5.- below $5 but above $4.- below $4.- above $5.The correct answer is likely **below $4**, as the firm would shut down in the short run if the price is below the average variable costs.

The shut down price is the minimum price a firm requires remaining open in the short run. That is, a…

Answered: 7.3.2 According to the figure below, a…

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7.3.2 According to the figure below, a firm would shut down in the short run if the price is Price and Cost MC ATC AVC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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