Explain the significance of minimum AVC in determining the shut-down condition.?

Question

dear all,

could you please answer this qn, i am at total lost

Answer 1

Basically firms only need to cover variable costs in the short run in order to stay operating. This is why the supply curve is the marginal cost curve above the average variable cost curve. If firms cannot cover the variable cost in the short run they will not supply the good or service. That's about all there is to know about it.

Hope that helps.