Calculating The Shutdown Point
The short run shutdown point is the minimum of the average variable cost curve. Assume that firms total cost function is TC = Q3 -5Q2 +60Q +125. Variable cost = Q3 -5Q2 +60Q Average variable costs = (Q3 -5Q2 +60Q)/Q= Q2 -5Q + 60
- AVC' = 2Q - 5
- AVC' = 0
- 2Q - 5 = 0
- 2Q = 5
- Q = 2.5
Read more about this topic: Shutdown (economics)
Famous quotes containing the words calculating the, calculating and/or point:
“What our children have to fear is not the cars on the highways of tomorrow but our own pleasure in calculating the most elegant parameters of their deaths.”
—J.G. (James Graham)
“[The] elderly and timid single gentleman in Paris ... never drove down the Champs Elysees without expecting an accident, and commonly witnessing one; or found himself in the neighborhood of an official without calculating the chances of a bomb. So long as the rates of progress held good, these bombs would double in force and number every ten years.”
—Henry Brooks Adams (1838–1918)
“Lieutenant, I’d like to point out to you that I don’t have to put up with this crap from you. I’m not in your two-bit army, I’m in our two-bit army.”
—Bryan Forbes (b. 1926)