Economics » Market Structures » Break-Even/Shut-Down Analysis of a Perfectly Competitive Firm

Long-Run Shut-down Decision of a Perfectly Competitive Firm

The long-run shutdown point for a perfectly competitive firm is the minimum point on its Long-run Average Total Cost (LAC) curve as shown in point C in Figure 10.8.

Fig. 10.8: The long-run shut-down point for a perfectly competitive firm

In Figure 10.8, point C is the firm’s shutdown point corresponding to price (P) and output (Q) below which the firm will not produce any output. The long-run supply curve of the firm is given by the long-run marginal cost curve (LMC) above point C (the minimum point on LAC).

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