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Question

In the long run, shut down point is ________.

A
minimum of LRMC curve
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B
minimum of LRAC curve
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C
minimum of AVC curve
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D
none of the above
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Solution

The correct option is B minimum of LRAC curve
The shutdown condition is given by PAC.
In the long run firms have no fixed factors, thus if the firm is not covering its average costs, it is profitable to shutdown the business and exit the industry.

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