In the theory of the firm, the shutdown point in the short run occurs when:
A. Price equals average fixed cost
B. Price equals marginal cost
C. Price equals average variable cost
D. Price equals average total cost
Answer: Option C
Solution (By JKSSB Mock Tests)
A firm continues to operate in the short run as long as price covers average variable cost. If price falls below AVC, the firm shuts down to minimise losses.
Explanation:
Pre-distribution emphasises interventions that affect the underlying distribution of market incomes—through skills, bargaining power, market structure and institutions—rather than relying solely on subsequent fiscal redistribution.
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