The shutdown point occurs where price equals the minimum of
A) MR.
B) AVC.
C) AFC.
D) ATC.

Question

Quizplus · Accepted Answer

The shutdown point occurs where price equals the minimum of the AVC (average variable cost) curve. At this point, the firm is indifferent between producing and shutting down in the short run, as it is earning just enough revenue to cover its variable costs. If the price falls below the minimum AVC, the firm will shut down as it is unable to cover even its variable costs.

The Shutdown Point Occurs Where Price Equals the Minimum of