### Economic Decision-Making for FirmsIf the price for a firm's output is greater than the minimum value of its average variable cost, but less than the minimum value of its average total cost, then:- **Option 1:** The firm should shut down in the short run, but resume producing in the long run.- **Option 2:** The firm should continue producing in the short run, but exit the market in the long run.- **Option 3:** The firm is earning positive economic profit.- **Option 4:** The firm should shut down in the short run and exit the market in the long run.- **Option 5:** The firm should continue producing in both the short run and the long run.This set of conditions typically arises in microeconomic analysis when firms must decide whether to continue manufacturing based on cost structures and pricing. When the output price is greater than the minimum average variable cost, the firm can cover its variable costs and some portion of its fixed costs, suggesting short-run continuity. However, since the price is less than the minimum average total cost, the firm is not covering its total costs in the long run, indicating a potential exit strategy if the situation does not improve.Understanding these options helps firms make informed decisions about their production strategies over different time horizons.

The average variable is the amount of variable cost incurred on developing a typical unit of…

If the price for a firm's output is greater than the minimum value of its average variable cost, but less than the minimum value of its average total cost, then the firm should shut down in the short run, but resume producing in the long run. the firm should continue producing in the short run, but exit the market in the long run. the firm is earning positive economic profit. the firm should shut down in the short run and exit the market in the long run. the firm should continue producing in both the short run and the long run.

If the price for a firm's output is greater than the minimum value of its average variable cost, but less than the minimum value of its average total cost, then the firm should shut down in the short run, but resume producing in the long run. the firm should continue producing in the short run, but exit the market in the long run. the firm is earning positive economic profit. the firm should shut down in the short run and exit the market in the long run. the firm should continue producing in both the short run and the long run.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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