The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4 D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
According to Figure 9.4, the firm's shutdown price is:

Question

The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4  D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
According to Figure 9.4, the firm's shutdown price is:

Quizplus · Accepted Answer

The shutdown price is the price at which the firm's average total cost (ATC) curve intersects with the demand curve (D). In this case, the ATC curve intersects with the demand curve at around $50. At this price, the firm is making a loss equal to the difference between the ATC and the price. If the price were to fall below this level, the firm would not even be able to cover its variable costs and would be better off shutting down in the short run. Therefore, the firm's shutdown price is $50.

The Figure Given Below Shows the Demand and Cost Curves