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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

How does the average variable cost curve help a firm know whether it should shut down immediately?

To determine

The way in which the average variable cost curve helps a firm in deciding about its sustainability.

Explanation

So long as the firm can recover the average variable cost of production from its earnings, even when it is making loss, it should not shut down. The minimum point of the average variable cost curve is called the shutdown point. It is this point which determines whether the firm should close down immediately or not...

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