1 What happens to the shut down prices for both the short an

1. What happens to the shut down prices for both the short and the long run? Explain thoroughly and analytically.

Solution

ans

For short run shut down prices =MIN of AVC because if price<min of AVC than firm get additional loss for per unint produced in addition to fixed cost.

In long run Price=min of ATC, If firm get negative economic profit in the long run thanm firm will not enter the market and shut down before opening it.