A firm's shut-down point is the minimum value of _____ cost.

Question

Quizplus · Accepted Answer

The shut-down point is when the firm is better off shutting down production in the short run rather than producing at a loss. This means that the firm's revenue doesn't cover its variable costs. Therefore, the shut-down point is determined by the minimum value of the firm's average variable cost (AVC). The firm should shut down when the price is less than or equal to the AVC, and in this case, it can minimize its losses by not producing anything. Therefore, the correct answer is B) average variable cost.

A Firm's Shut-Down Point Is the Minimum Value of _____