Consider the following short- run cost curves for a perfectly competitive firm. FIGURE 9- 1
-Refer to Figure 9- 1. The diagram shows cost curves for a perfectly competitive firm. The short- run shut down price for the firm is
A) P2.
B) P5.
C) P1.
D) P4.
E) P3.

Question

Consider the following short- run cost curves for a perfectly competitive firm.  FIGURE 9- 1
-Refer to Figure 9- 1. The diagram shows cost curves for a perfectly competitive firm. The short- run shut down price for the firm is
A) P2. 
B) P5. 
C) P1. 
D) P4. 
E) P3.

Quizplus · Accepted Answer

The short-run shut down price for a perfectly competitive firm is the price at which the firm's price falls below its minimum average variable cost (AVC). In this diagram, the minimum AVC is at point A, and the corresponding price is P1. Therefore, the firm would shut down in the short run if the price falls below P1.

Consider the Following Short- Run Cost Curves for a Perfectly