Question

Topic 2: Discuss why a firm may decide to continue producing a good even if its price may be less than the average total cost. (Hint: Refer to the shut-down point and provide a real-world example so others can come up with different examples).

Answer 1

SOLUTION 2 :---

GIVEN That to

hence a firm will continue to produce as long as the average variable costs are covered by revenue.. then to fixed costs are already incurred and a firm will lose more money by shutting down. as long as the variable costs are covered, the firm need not shutdown..  

so that to hence then the closing down k-mart stores because AVC exceed price.as long as revenues exceeded AVC, the k- mart stores were but had to shutdown when p is would bE not cover AVC.