The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4
D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
-According to Figure 9.4,the firm's shutdown price is:

Question

The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4  
D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
-According to Figure 9.4,the firm's shutdown price is:

Quizplus · Accepted Answer

The shutdown price is the price at which the total revenue earned by the firm is not enough to cover its variable costs. This occurs at the point where the average variable cost (AVC) curve intersects the marginal cost (MC) curve. In the given figure, the AVC curve intersects the MC curve at around $50. Thus, if the price falls below $50, the firm will shut down. Therefore, the correct choice is (C).

The Figure Given Below Shows the Demand and Cost Curves