6. Given the following information,
state whether the firm (perfect
competition market) should shut down,
or continue to operate in the short run.
Q = 100; P = $10; AFC = $3; AVC = $4
Q = 70; P = $5; AFC = $2; AVC = $7
Q = 150; P = $7; AFC = $5; AVC = $6
AFC + AVC = ATC . ATC = $7 and P = $10. Since P (RM10) > ATC
(RM7=RM3+RM4) & > AVC. Hence, continue to operate in the short run.
ATC = $9 and P = $5. P < ATC. Besides, P is also < AVC. Hence, shut
down in the short run.
ATC = $11 and P = $7. P < ATC. However, P is > AVC. Hence, continue
to operate in the short run.