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Total, Average and Marginal Revenue

Study the dia...

Question

Study the diagram below, and answer the following questions.
('U' shaped line represents the AC curve)

What is the condition for a shut down point?

[1 mark]

A

P = AC

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B

P = AR

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C

P = AVC

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D

AC = AVC

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Solution

The correct option is C P = AVC
When the price of the commodity reaches the AVC, then the firm will shut down with any fall in price.

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