Consider the Following Data: Equilibrium Price = $12

Multiple Choice

Consider the following data: equilibrium price = $12.50, quantity of output produced = 1,000 units, average total cost = $15, and average variable cost = $13. What will the firm do and why?

A) Shut down in the short run, because price is below average variable cost.
B) Shut down in the short run, because it will be taking a loss of $2,500 if it continues to produce which is less than the loss it will earn if it shuts down.
C) Continue to produce in the short run, because price is greater than average variable cost.
D) Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
E) none of the above