The Shutdown Point

What is the shutdown point?

In the previous concepts, while procuring the supply curve, we 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, as we go down along the supply curve, the last cost price-output combination at which the enterprise manufactures the positive output is the point of minimum average variable cost (AVC), where the short Run marginal cost (SMC) curve cuts the AVC curve.

After this, there is no production process at all. This point is known as the short run shutdown point of the enterprise. However, in the long run, the shutdown point is the minimum of the long run average cost curve (LRAC) curve.

This concept is about the shutdown point. To learn more about such concepts, stay tuned to our website.


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