The Razor-Thin Disposable Razor Company is a perfectly competitive firm producing where MR = MC. The current market price of a disposable razor is $3.00. The firm sells 1,800 disposable razors. Its AVC is $4.00 and its AFC is $1.50. What should Razor-Thin do?
A. Continue to produce because price exceeds AFC.
B. Increase production so that AFC will decrease.
C. Shut down and produce zero razors because price is less than AVC.
D. Decrease production so that AVC will decrease.
Answer: C
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