A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run?
A. Shut down if price is greater than average variable costs.
B. Produce where MC = MR to minimize losses if P < AVC.
C. Shut down if total revenue is less than fixed costs.
D. Produce where MC = MR to minimize losses if P > AVC.
Answer: D
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