The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-A competitive firm's minimum supply price in the short run is its shutdown price.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-A competitive firm's minimum supply price in the short run is its shutdown price.

Quizplus · Accepted Answer

In the short run, a competitive firm will continue to produce as long as the market price is higher than its minimum supply price (also known as the shutdown price). If the market price falls below this point, the firm will shut down in the short run as it cannot cover its variable costs. Therefore, the statement is true.

The Figure Given Below Shows the Aggregate Demand and Supply