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Chapter 8: Q. 23 (page 212)

What two lines on a cost curve diagram intersect at the shutdown point ?

Short Answer

Expert verified

The curves are average variable cost (AVC) and marginal cost (MC).

Step by step solution

01

Shut down point :

A shutdown point occurs when a business sees non-profit in ongoing operations and, as a response, chooses to shut down partially or permanently in certain cases.

02

Explanation :

These two curves are linked because marginal cost may be calculated from total variable cost. This is illustrated in the diagram below:

The marginal cost curves cross the average variable cost curve at its lowest point, as may be seen here.

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Most popular questions from this chapter

Firms in a perfectly competitive market are said to be 鈥減rice takers鈥濃�攖hat is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

How does the average variable cost curve help a firm know whether it should shut down immediately?

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