The short-run shutdown point for a perfectly competitive business occurs at the point where:
A)price equals minimum AVC
B)total revenue is less than total cost
C)the business stops making an economic profit
D)price equals minimum AC
E)price equals minimum MC

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive business will shut down when the price of the product is lower than the minimum average variable cost (AVC). This happens because the business is unable to cover its variable costs and would incur losses if it continues to produce. Therefore, the short-run shutdown point occurs at the point where price equals minimum AVC.

The Short-Run Shutdown Point for a Perfectly Competitive Business Occurs