JAMB - Economics (2024 - No. 9)
In the long-run, a firm must shut down if its average revenue is
greater than average cost
equal to the average cost
equal to the minimum average revenue is
less than average variable cost
Vysvětlení
If the firm's average revenue is less than average variable cost, it means the firm is not generating enough revenue to cover its variable costs, such as labor, raw materials, and other variable inputs. In this situation, the firm is incurring losses on each unit produced and sold. Continuing to operate would result in further losses, making it more economical viable for the firm to shut down in the long run.