Question

Suppose that a firm’s AFC = $2 and its AVC is $3. At what price is the firm’s shut-down point?

Answer 1

The firm having an average variable cost of $3, should shut down at any price below the average variable cost that is of $3 so the shutdown point is $3. average variable cost is $3 that means the average variable cost curve and the marginal cost intersect at a point where the price is $3 but the marginal cost curve intersect the marginal revenue curve below a point where the price is below $3 then firm should shutdown.

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