When a firm is able to cover its variable costs only, it will be at:

break-even point

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equilibrium point

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shut-down point

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none of the above

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Solution

The correct option is C shut-down point
A firm reaches shut-down point when: AR=AVC.When a firm is able to cover its variable costs only, it will be at shut-down point. At shut-down point, the firm no longer gets benefits from its operations.

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