The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-For a perfectly competitive firm the break-even price is equal to the shutdown price in the short run.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-For a perfectly competitive firm the break-even price is equal to the shutdown price in the short run.

Quizplus · Accepted Answer

In the short run, the break-even price is the minimum point of the average variable cost curve, while the shutdown price is the minimum point of the average variable cost curve. The break-even price is higher than the shutdown price because it also covers the fixed cost. Therefore, for a perfectly competitive firm, the break-even price is not equal to the shutdown price in the short run.

The Figure Given Below Shows the Aggregate Demand and Supply