Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point
What will be an ideal response?
The shutdown point is the point at which the price equals minimum average variable cost. If the price falls further, the firm does not even cover its variable costs if it operates. Its loss if it operated thus exceeds the loss of shutting down and so the firm shuts down.
Economics
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If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:
A. inelastic. B. elastic. C. unit elastic. D. perfectly inelastic.
Economics
When interpreting the Ed value as either elastic or inelastic, we look at the
A. percent change in price. B. Ed coefficient with its negative sign. C. absolute value of the Ed coefficient (dropping the negative sign). D. percent change in quantity.
Economics