Assume two firms have the same total costs of production. Firm A’s average variable cost if $5 per unit and firm B’s average variable cost is $7. Both firms have an average total cost of $8. If the current market price is $6 and remains unchanged what action will both firms take in the short run and the long run?

To determine the actions that both firms will take in the short run and long run, we need to analyze their average variable cost (AVC) and the market price.

In the short run, firms will compare the market price per unit with their AVC to decide whether to continue or shut down production. If the market price is greater than or equal to the AVC, a firm will continue producing. Otherwise, it will shut down.

In this case, Firm A has an AVC of $5, while Firm B has an AVC of $7. The market price is $6.

For Firm A:
- Average Variable Cost (AVC) = $5 per unit
- Market price = $6 per unit

Since the market price ($6) is greater than or equal to the AVC ($5), Firm A will continue production in the short run.

For Firm B:
- Average Variable Cost (AVC) = $7 per unit
- Market price = $6 per unit

The market price ($6) is less than the AVC ($7), which means Firm B will shut down production in the short run as it would incur losses by producing.

In the long run, firms can adjust their variable inputs and make decisions based on their average total cost (ATC). If the firm's average total cost is greater than the market price, it will exit the industry. On the other hand, if the average total cost is equal to or less than the market price, it will continue operating.

Both firms have an average total cost (ATC) of $8.

For Firm A:
- Average Total Cost (ATC) = $8 per unit
- Market price = $6 per unit

Since the market price ($6) is less than the ATC ($8), Firm A will exit the industry in the long run as it cannot cover its costs and would incur losses.

For Firm B:
- Average Total Cost (ATC) = $8 per unit
- Market price = $6 per unit

The market price ($6) is also less than the ATC ($8), so Firm B will exit the industry in the long run.

Therefore, both firms will shut down production in the long run as they cannot cover their costs and would incur losses at the given market price.