If the market price falls below $4.50, the firm will earn


A. positive economic profits in the short run.

B. negative economic profits in the short run but remain in business.

C. negative economic profits in the short run and shut down.

D. zero economic profits in the short run.

This post can be answered with common sense.

Sra

no idea

To determine the answer to this question, we need to consider the concept of economic profits and the firm's decision-making criteria in the short run.

Economic profit is defined as the difference between total revenue and total cost, including both explicit costs (such as rent and wages) and implicit costs (such as the opportunity cost of using the firm's resources).

In the short run, a firm will continue to operate as long as it covers its variable costs (the costs that can be adjusted in the short run, such as labor and raw materials). If the market price falls below the firm's average variable cost, it will be unable to cover these costs, resulting in negative economic profits.

Based on the given information, the firm will earn negative economic profits if the market price falls below $4.50.

The correct answer is option C: negative economic profits in the short run and shut down.