Question 12
Theory of Costs and RevenueThe shut-down point for a firm in the short run is the output at which
- A.the price of the product is lowest
- B.Marginal Cost is constant
- C.Average Variable Cost is not covered
- D.Average Cost is minimum.
Show the answer and explanation
Answer: C (Average Variable Cost is not covered)
Explanation
In the short run a firm keeps producing as long as price covers average variable cost; once it does not, it shuts down.