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Chapter 7: Q.23 (page 210)

What two lines on a cost curve diagram intersect at

the shutdown point?

Short Answer

Expert verified

The average variable cost curve and the marginal cost curve are the two lines that intersect at the shutdown point.

Step by step solution

01

Introduction

Theaveragevariablecostisthecostofvariableinputsperunit.
Theadditionalcostincurredforproducinganadditionalunitofoutputisknownasmarginalcost.
The minimum point on the average variable cost curve is known as the shutdown point.
02

Explanation

These two curves are linked because marginal cost may be calculated from total variable cost.
The graphic below illustrates this:

The marginal cost curve intersects the average variable cost curve at its minimum point in this diagram.

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