Textbook Notes (358,679)
United States (202,385)
Economics (64)
ECON 2000 (14)
A L L (14)
Chapter 9

ECON 2000 Chapter 9 (98% on the test)
ECON 2000 Chapter 9 (98% on the test)

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School
Louisiana State University
Department
Economics
Course
ECON 2000
Professor
A L L
Semester
Fall

Description
ECON2000THEMARKETSYSTEMChoicesMadebyHouseholdsFirmsChapter9LONGRUNCOSTSOUTPUTDECISIONS1BREAKINGEVENthesituationinwhichafirmisearningexactlyanormalrateofreturn2BecauseafirmmustbearFIXEDCOSTSwhetherornotisshutsdownitsdecisiondependssolelyonwhethertotalrevenuefromoperatingissufficienttocovertotalvariablecost3SHUTDOWNPOINTthelowestpointontheaveragevariablecostcurveWhenpricesfallbelowtheminimumpointonAVCtotalrevenueisinsufficienttocovervariablecostsandthefirmwillshutdownandbearlossesequaltofixedcostsaAtpricesbelowAVCitpaysafirmtoshutdownratherthancontinueoperatingThustheshortrunsupplycurveofacompetitivefirmisthepartofitsmarginalcostcurvethatliesABOVEitsaveragevariablecostcurvebAnytimethatpriceisbelowtheminimumpointontheaveragevariablecostcurvetotalrevenuewillbelessthantotalvariablecostandthefirmwillshutdownTheminimumpointontheaveragevariablecostcurvewhichisalsothepointwheremarginalcostandaveragevariablecostinterestiscalledtheSHUTDOWNPOINTAtallpricesabovethe
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