WAEC - Economics (2018 - No. 18)
in the the longrun, a firm must shut down if its average revenue is?
greater than average cost
less than average variable cost
equal to the minimum average cost
equal to the average cost
Vysvětlení
A firm will choose to implement a shutdown of production when the revenue received from the sale of the goods or services produced cannot even cover the variable costs of production. In that situation, the firm will experience a higher loss when it produces, compared to not producing at all.
Technically, shutdown occurs if average revenue is below average variable cost at the profit-maximizing positive level of output.