Question

If a​ firm's average total cost is less than price where MR​ = MC,

A. the firm should cut back on its output to lower its cost.
B. the firm should raise its price.
C. the firm should produce if its price exceeds average variable cost.
D. the firm should shut down.

Answer 1

C. the firm should produce if its price exceeds average variable cost.

Step-by-step explanation:

WHen average total cost is less that price, this means you are making a profit, and since they are in the equilibrium sate with Margina revenue being equal to marginal cost, they are in the sweet spot of production, so the only thing left for them is producing if its price exceeds average variable cost, and that would maximize their profits.