Your average total cost is $30; the price you receive for the good is $12. Shoul

Question

Your average total cost is $30; the price you receive for the good is $12. Should you keep on producing the good? Why?
A. Yes as long as you do not have any other goods to sell for more than $12.
B. Maybe. It depends upon whether you are covering average variable costs in the long run.
C. No. In the long run you should not continue to produce at a loss, and because all inputs are variable you can get out of business.
D. No. In the long run you should only continue to produce at a small loss. It is always possible to make up small losses, but in this case the loss is too large to make up in the future

Explanation / Answer

B. Maybe. It depends upon whether you are covering average variable costs in the long run.

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