Assume that the following data is for a profit-maximizing manufacturer:

-Refer to the above information to answer this question.If the total fixed costs were to increase by $50 what would be the new shut-down price?

Question

Assume that the following data is for a profit-maximizing manufacturer:
 
-Refer to the above information to answer this question.If the total fixed costs were to increase by $50 what would be the new shut-down price?

Quizplus · Accepted Answer

The shutdown price is the price below which the manufacturer would prefer to shut down production rather than operate at a loss. It is equal to the minimum average variable cost (AVC) of production. 
From the provided data, we can see that the minimum point of the AVC curve happens at a price of $30. 
An increase in total fixed cost would not affect the shape of the AVC curve but would increase the level of average cost at every level of output. Therefore, the shutdown price would still be the same as the minimum point of the AVC curve, which is $30. Hence, option A is the correct answer.

Assume That the Following Data Is for a Profit-Maximizing Manufacturer