The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.2 MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 9.2.The firm will suspend production if the price falls below:

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.2  MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 9.2.The firm will suspend production if the price falls below:

Quizplus · Accepted Answer

The firm will shut down in the short run if the price falls below the minimum point of the AVC curve, which is $10 in this case. At a price of $10, the firm's revenue will only cover its variable costs and it will not be able to pay for any fixed costs or make any profit. Therefore, it is best for the firm to suspend production rather than continue operating at a loss.

The Figure Given Below Shows the Revenue and Cost Curves