In economics,
shutdown occurs if
marginal revenueIn microeconomics, Marginal Revenue is the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good; sometimes equal to price...
is below
average variable costAverage variable cost is an economics term to describe a firms variable costs divided by the quantity of total units of output.Where:* TVC = Total Variable Cost* AVC = Average Variable Cost...
at the profit-maximizing output. Producing anything would not generate returns significant enough to offset any fixed cost and part of the variable cost. By not producing, the firm loses only the fixed cost.
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In economics,
shutdown occurs if
marginal revenueIn microeconomics, Marginal Revenue is the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good; sometimes equal to price...
is below
average variable costAverage variable cost is an economics term to describe a firms variable costs divided by the quantity of total units of output.Where:* TVC = Total Variable Cost* AVC = Average Variable Cost...
at the profit-maximizing output. Producing anything would not generate returns significant enough to offset any fixed cost and part of the variable cost. By not producing, the firm loses only the fixed cost.
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