Concept:The shutdown condition for a firm in the long-run, when no costs are fixed, depends on comparing average revenue (price) with average variable cost.
Explanation:In the long-run, a firm has no fixed costs. Every cost is variable, so average cost equals average variable cost.
A firm continues to produce only if it can cover all its costs. If average revenue is less than average variable cost, the firm cannot cover its costs and must shut down.
Shutting down stops further losses.
In long-run equilibrium, firms leave the market when price falls below average cost. Since fixed costs are zero, this condition is the same as price being less than average variable cost.
Thus, a firm must shut down when average revenue is less than average variable cost.
Answer:B. less than average variable cost