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    AVC relating decisions of output

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    Having a difficult time in understanding the subject of AVC relating decisions of output.

    Here is the type of question that is giving me difficulty. Please provide some insight.

    If price is less than average variable cost at a level of output where marginal revenue is equal to marginal cost, then in the short run the firm:
    Question 3 answers
    a. should shut down.
    b. should produce the level of output where marginal revenue equal marginal cost.
    c. should gather more data to determine whether to shut down.
    d. will produce only if they can decrease their fixed costs.

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    https://brainmass.com/economics/pricing-output-decisions/avc-relating-decisions-of-output-159417

    Solution Preview

    a. should shut down.
    If in the short run the price falls below the AVC (at the point where MR = MC), ...

    Solution Summary

    AVC relating decisions of output are noted.

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