At the profit-maximizing output level, a shutdown occurs when price or average revenue (AR) falls below average variable cost (AVC). Production will continue, but there won't be enough revenue to cover the additional variable costs.
Why are businesses willing to accept short-term losses but not long-term ones?
average total cost curve, whereas a company's exit point is the minimum point on the average variable cost curve over the long term.In the short run, there are fixed costs, but not in the long run.
Can a company lose money quickly?
Maximizing profits in the short term.The company can make more money by producing more goods when its marginal revenue is higher than its marginal cost.When the company's marginal revenue is lower than its marginal cost, it is losing money and must reduce its output.
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