Final answer:
Alex should shut down his lawn-mowing service in the short run if the price falls below his minimum average variable costs, resulting in revenues that cannot cover the total variable costs.
option d is the correct
Step-by-step explanation:
The student is asking about the short-run shut down condition for a firm in a perfectly competitive market. Specifically, the question centers on when Alex, who runs a summer lawn-mowing service, should decide to stop operations. The determining factor for the shutdown decision is whether the price the firm receives for its product is able to cover the firm's average variable costs (AVC).
If the price falls below the firm's minimum AVC, then it should cease operations immediately, regardless of total fixed costs. If the price is equal to or higher than the minimum AVC, then the firm should continue to operate in the short run, even if it means incurring losses, as long as it can cover the AVC and some portion of the fixed costs.
Therefore, the correct answer is: Alex will shut down his lawn-mowing service rather than continue mowing grass if the total revenues can't cover the total variable costs (option d). This situation is based on the rationale that it is better to only bear the fixed costs (since they cannot be avoided in the short run) than to also incur additional variable costs that lead to greater losses.