A. Above and Below Average Variable Cost
Explanation

Once price is below average cost the farm loses money whatever it does, so the question is which choice loses least. Shutting down still leaves the fixed cost of $62 to pay. Staying open is better whenever price covers average variable cost, because every pack then pays its own variable cost and contributes something toward the fixed cost.

In (a), at $2.00, the farm produces 65 packs and loses about $47, less than the $62 it would lose by closing, so it stays open. In (b), at $1.50, price is below average variable cost at the 60 packs where P = MC: revenue would be $90 against total cost of $165, a loss of $75, worse than the $62 from shutting down. The shutdown point is the minimum of average variable cost, about $1.72. The sliders set the price in each panel.

Prices