A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $4.50. What do you recommend this firm do?
A. Increase production above the current output rate, because MC = MR at this rate of output.
B. Shut down, because ATC > P.
C. Shut down, because AVC > P.
D. Continue to produce the current output rate, because P > AVC.
Answer: D
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