-Refer to this diagram for a perfectly competitive producer.The lowest price at which the business should produce (as opposed to closing down) is:

Question

-Refer to this diagram for a perfectly competitive producer.The lowest price at which the business should produce (as opposed to closing down)is: A)P₁ B)P₂ C)P₃ D)P₄

Quizplus · Accepted Answer

The lowest price at which a business should produce rather than shutting down is the price that covers its variable costs. This is known as the shutdown point. In a perfectly competitive market, if the price falls below this level, the firm cannot even cover its variable costs and would minimize its losses by ceasing production. The correct choice corresponds to the price that aligns with the minimum point on the average variable cost curve, which is indicated by choice B.

-Refer to This Diagram for a Perfectly Competitive Producer