Question

Level of output at which average variable costs equal average revenue or the market price.

a. Marketing margin
b. Isoquant
c. Shutdown output
d. Close down case

Answer 1

The shutdown point is the level of output at which average variable costs equal average revenue or the market price. It is the point at which a firm should consider shutting down operations if the market price is below the average variable cost. The shutdown point is the intersection of the average variable cost curve and the marginal cost curve.

Step-by-step explanation:

The level of output at which average variable costs equal average revenue or the market price is called the shutdown point. This is the point where the firm should consider shutting down operations if the market price is below the average variable cost at the profit-maximizing quantity of output.

If the market price is above the average variable cost but below the average cost, the firm should continue producing in the short run but exit in the long run.

The shutdown point is the intersection of the average variable cost curve and the marginal cost curve.