A perfectly competitive firm will be operating at its shutdown point if it operates
A) where P = MC.
B) at the minimum point on its average variable cost curve.
C) at the minimum point on its average total cost curve.
D) at the minimum point on its marginal cost curve.

Question

Quizplus · Accepted Answer

At the shutdown point, a firm's price equals its average variable cost (AVC). This is the minimum point on its AVC curve, where it covers its variable costs but not its fixed costs. Operating at this point, the firm is indifferent between producing and shutting down in the short run.

A Perfectly Competitive Firm Will Be Operating at Its Shutdown