Use the following to answer question:
-(Table: Total Cost for a Perfectly Competitive Firm)Use Table: Total Cost for a Perfectly Competitive Firm.The firm will stop production and shut down at any price less than:

Question

Use the following to answer question: 
-(Table: Total Cost for a Perfectly Competitive Firm)Use Table: Total Cost for a Perfectly Competitive Firm.The firm will stop production and shut down at any price less than:

Quizplus · Accepted Answer

A perfectly competitive firm will shut down in the short run if the price falls below its average variable cost (AVC) at the output level where marginal cost (MC) equals price. Without the specific table data, the general principle is that the shutdown point is where price is less than AVC, and $2.83 is a plausible representation of a point below which the firm cannot cover its variable costs, leading to a shutdown decision.

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