The significance of the minimum point on the average variable cost curve is that

Question

Quizplus · Accepted Answer

The minimum point on the average variable cost curve represents the level of output at which the firm is indifferent between producing at a loss or shutting down. This is because at this point, the average variable cost equals the price per unit, meaning the firm is covering its variable costs but not its fixed costs. If the firm were to produce any less, it would not be covering its variable costs and would be better off shutting down. If the firm were to produce any more, it would not only fail to cover its fixed costs, but its average variable cost would also rise, making it more costly to produce each additional unit. Therefore, the minimum point on the AVC curve is the point of minimum loss or maximum profit for the firm.

The Significance of the Minimum Point on the Average Variable