Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

11. Perfect Competition

Short Run Shutdown Decision

Microeconomics

11. Perfect Competition

Short Run Shutdown Decision

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Multiple Choice

The firm shuts down at any price below:

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Verified step by step guidance

Identify the Average Variable Cost (AVC) curve on the graph. This curve is typically U-shaped and represents the variable costs per unit of output.

Determine the shutdown point, which occurs where the price is equal to the minimum point on the AVC curve. This is because a firm will shut down in the short run if the price falls below the minimum AVC, as it cannot cover its variable costs.

Locate the minimum point on the AVC curve on the graph. This is the lowest point on the AVC curve, where it intersects with a horizontal line representing a specific price level.

Observe the price level corresponding to this minimum point on the AVC curve. This price level is the shutdown price, below which the firm will cease production in the short run.

Compare the given price options (P1, P2, P3, P4) with the price level identified at the minimum point of the AVC curve to determine the correct shutdown price.