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

Question

Quizplus · Accepted Answer

The shutdown point is the level of output at which the firm's total revenue is equal to its variable costs. In other words, the firm is covering its variable costs, but not its fixed costs. At this point, the firm is indifferent between continuing to produce and shutting down. Thus, the shutdown point occurs where price equals the minimum of AVC (average variable cost), since AVC represents the minimum amount the firm must charge per unit of output to cover its variable costs. MR and AFC (average fixed cost) are not relevant to the shutdown decision.

The Shutdown Point Occurs Where Price Equals the Minimum of