Final answer:
When the price of a firm's variable input, such as the hourly wage rate, decreases while all other factors remain constant, it leads to a decrease in the firm's costs of production. If the price falls below the new minimum average variable cost (MAVC), the firm may choose to shut down its operations.
Step-by-step explanation:
In economics, when the price of a firm's variable input, such as the hourly wage rate, decreases while all other factors remain constant, it will lead to a decrease in the firm's costs of production. This will result in a decrease in the minimum average variable cost (MAVC), which is the minimum cost required to produce a certain level of output. If the price falls below the new MAVC, the firm may choose to shut down its operations.
For example, if a company's variable input is labor and the hourly wage rate decreases, the company will be able to produce its output at a lower cost, reducing the MAVC. If the market price falls below the new MAVC, the company may not be able to cover its costs and may choose to shut down its production.