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WAEC Economics 2025 Question 49

Question 49

Market Structures

If a firm's minimum average variable cost exceeds its average revenue, the firm must

  1. A.increase its production capacity.
  2. B.employ more labour.
  3. C.pay new allowances to its workers.
  4. D.shut down completely.
Show the answer and explanation

Answer: D (shut down completely.)

Explanation

If price cannot cover AVC, producing only adds to losses.