In the graph, the shut-down point of the firm in the short run is A firm's short-run cost curves. AVC is lowest at ₹6 (point S, 3 units); AC is lowest at ₹15 (point B, 4 units); the rising MC curve passes through S and B. A price line is drawn at ₹24.

In the graph, the shut-down point of the…

In the graph, the shut-down point of the firm in the short run is

Question 12

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In the graph, the shut-down point of the firm in the short run is

A firm's short-run cost curves. AVC is lowest at ₹6 (point S, 3 units); AC is lowest at ₹15 (point B, 4 units); the rising MC curve passes through S and B. A price line is drawn at ₹24.

S, the lowest point of AVC, at a price of ₹6Correct answerYour answerB, the lowest point of AC, at a price of ₹15Correct answerYour answerwhere price is ₹24Correct answerYour answerwhere MC is lowestCorrect answerYour answer

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CorrectNot quiteAnswer A

Correct answer: A

In the short run a firm keeps producing as long as price covers AVC, because fixed cost must be paid anyway.
Below ₹6, the minimum AVC, it loses less by shutting down: S is the shut-down point.

Concept: Short-run shut-down point
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsProfit maximisation and the firm's supply

Practise this chapter →

Ten questions from Perfect Competition & Supply, at your own pace.

Practise this chapter →

Ten questions from Perfect Competition & Supply, at your own pace.

In the graph, the shut-down point of the firm in the short run is

Question 12

Explanation