What is The Shutdown Point?
In the previous concepts, while procuring the supply curve, we had discussed that in the short run the enterprise continues to manufacture as long as the cost price remains greater than or equivalent to the minimum of AVC. Hence, along the supply curve as we go down, the last cost price-output combination at which the enterprise manufactures positive output is the point of minimum Average Variable Cost (AVC) where the Short Run Marginal Cost (SMC) curve cuts the AVC curve.
Below this, there will be no production process at all. This point is known as the short run shutdown point of the enterprise. In the long run, however, the shutdown point is the minimum of long run average cost curve (LRAC) curve.
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