Question 5 Consider the graph below. Should this firm stay open or shut down in the short run and why? MC ATC ATC AVC P* -MR AVC 10 Stay open because their loss from operating is greater in magnitude than their fixed costs Stay open because their loss from operating is less in magnitude than their fixed costs Shut down because their loss from operating is greater in magnitude than their fixed costs Shut down because their loss from operating is less in magnitude than their fixed costs

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
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Question 5
Consider the graph below. Should this firm stay open or
shut down in the short run and why?
MC
ATC
ATC*
AVC
P*
-MR
B
AVC*
10
O Stay open because their loss from operating is
greater in magnitude than their fixed costs
Stay open because their loss from operating is
less in magnitude than their fixed costs
Shut down because their loss from operating is
greater in magnitude than their fixed costs
Shut down because their loss from operating is
less in magnitude than their fixed costs
Transcribed Image Text:Question 5 Consider the graph below. Should this firm stay open or shut down in the short run and why? MC ATC ATC* AVC P* -MR B AVC* 10 O Stay open because their loss from operating is greater in magnitude than their fixed costs Stay open because their loss from operating is less in magnitude than their fixed costs Shut down because their loss from operating is greater in magnitude than their fixed costs Shut down because their loss from operating is less in magnitude than their fixed costs
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