Economics · Theory of Firm and Production

According to short-run production theory, a competitive firm will terminate (shut down) production when:

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1Marginal Cost becomes zero
2Total Fixed Cost is fully covered
3Price falls below Average Variable Cost✓
4Marginal Revenue equals Marginal Cost

Correct answer

Price falls below Average Variable Cost

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According to short-run production theory, a competitive firm will terminate (shut down) production when:

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According to short-run production theory, a competitive firm will terminate (shut down) production when:

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