Your firm has a price of $5, an average total cost of $7, and an average variable cost of $4. In the short run, you should ________(operate/shut down) because ________exceeds ________ average variable cost price . In the long run, you should _________(stay in/exit) the market because ________ average total cost price exceeds__________average variable cost price average total cost .
Accepted Solution
A:
Answer:Step-by-step explanation:Given that a firm has a price of $5, an average total cost of $7, and an average variable cost of $4Price = 5Var cost = 4Contribution = 1 dollar per unitSince contribution is positive, there is scope for getting profit by increasing production.In the short run, you should __operate______(operate/shut down) because __Price______exceeds ________ average variable cost price . In the long run, you should __exit______(stay in/exit) the market because ________ average total cost price exceeds____price.______average variable cost price average total cost