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Agriculture Economics QUESTION #11873
Question 1
The shutdown point for a competitive firm in the short run occurs where price falls:
  • Below average total cost but above average variable cost
  • Below the minimum point of $AVC$✔️
  • Below average fixed cost only
  • To exactly equal marginal cost at any output
Correct Answer Explanation
A firm shuts down when price drops below minimum $AVC$, since it cannot even cover variable costs by operating.