Final answer:
Chris Mahoney must approve a deal if the product price falls below about $1.65 or $1.72, which represent the minimum average variable cost below which the firm must shut down. Price floors like the minimum wage aim to ensure basic living standards, while setting prices at marginal cost can be unsustainable if below average production costs.
Step-by-step explanation:
Chris Mahoney has to approve a deal if it has just one product price that drops below the level of minimum average variable cost.
In reference to Table 8.6, the critical price level appears to be $1.65 or $1.72, depending on the specific context provided.
When the price falls below this threshold, it is no longer economically viable for the firm to continue operating, as it would be selling the product at a loss that is not even covering the variable costs of production.
According to LibreTexts™, a price floor like the minimum wage is the lowest legal price, and it is established to maintain a basic standard of living.
In market economies, price mechanisms such as price ceilings can lead to shortages and quality deterioration, illustrating the complexities of price regulation.