At Shut-Down Point-
At Shut-Down Point-
The correct option is A Total Revenue is equal to TVC
The shutdown
point denotes the
exact moment when a company's (marginal) revenue is equal to its variable
(marginal) costs—in other words, it occurs when the marginal profit becomes
negative. The short run shutdown point for a
competitive firm is the output level at the minimum of the average variable
cost curve. Assume that a firm's total cost function is TC = Q3 -5Q2 +60Q +125.
The shut down price are the conditions and price where a firm will
decide to stop producing. It occurs where AR <AVC. The shut down price is said
to occur, where price (average revenue AR) is less than average variable costs (AVC).
If the market price that a perfectly competitive firm faces is
above average variable cost, but below average cost, then the firm should
continue producing in the short run, but exit in the long run. We call the point where the
marginal cost curve crosses the average variable cost curve the shutdown
point.
The shutdown point denotes the exact moment when a company's (marginal) revenue is equal to its variable (marginal) costs—in other words, it occurs when the marginal profit becomes negative. The short run shutdown point for a competitive firm is the output level at the minimum of the average variable cost curve. Assume that a firm's total cost function is TC = Q3 -5Q2 +60Q +125. The shut down price are the conditions and price where a firm will decide to stop producing. It occurs where AR <AVC. The shut down price is said to occur, where price (average revenue AR) is less than average variable costs (AVC). If the market price that a perfectly competitive firm faces is above average variable cost, but below average cost, then the firm should continue producing in the short run, but exit in the long run. We call the point where the marginal cost curve crosses the average variable cost curve the shutdown point.
