Homework Answers
a) 
.No if the price fell slightly
the firm will not go out of the market because in the short run the
firm will continue to produce if the price is above the AVC and
below the ATC i.e. the firm will be facing only the variable
cost.
b) True, as the firm will produce at a point where the marginal cost and the marginal revenue are equal, at this point the output will be less and price will be higher.
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