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4 weeks ago

Figure 9.4


Figure 9.4 represents a perfectly competitive firm's costs. Illustrate the firm's shut-down price on the graph. Explain.
Textbook 
Survey of Economics: Principles, Applications and Tools
Edition: 6th
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The firm's shut-down price is defined as the price at which the firm is indifferent between operating and shutting down. In Figure 9.4, the shut-down price is $10. At the shut-down price, marginal cost equals price and average variable cost also equals the price. Therefore, marginal cost also equals average variable cost, and so the shut-down price is at the minimum point of the SAVC curve.
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