Comments on: Microeconomics Profit Maximization: Shutdown Point

By: Kate

Kate — Thu, 01 Sep 2011 05:12:57 +0000

why some textbooks say that in the short run, a shut down dicison is when P= average avoidable cost? Since total cost=fixed cost+ variable cost or total cost= sunk cost+ avoidable cost, I think avoidable cost and variable cost are different.

By: pean george

pean george — Mon, 07 Mar 2011 07:07:06 +0000

firm in the long run can operate despite the facty that there small element of fixed cost,because non firm can operate without iniatial fixed cost

By: Dave Hancock

Dave Hancock — Thu, 17 Feb 2011 04:10:23 +0000

What is the formula for calculation of total gains when saving a corporate dollar? If I save one dollar, or one product from scrap; I save at least 2, and the cost of making the third, less scrap return, plus cost saving from non scraping. What other costs advantages occur which can maximize the return? Thanks for any help. Dave

By: Patty

Patty — Thu, 04 Nov 2010 18:18:56 +0000

Thanks! I didn't understand the shut down period so this is really helpful. Thank you!

By: John

John — Fri, 30 Apr 2010 01:07:26 +0000

I was having trouble understanding this as well. Thanks for the clarification. No doubt these variables have a definite bearing on the success or failure of a firm/corporation. I would think that a company would shut down before P=AVC to conserve or try to save or reduce there cost or reduce there operating expensive prior to that point.

Cheers

By: Barry Econ

Barry Econ — Sat, 19 Dec 2009 18:16:11 +0000

It's not a hard fast conclusion, it's a theory on profit maximizing firms in microeconomics.

By: ChrisK

ChrisK — Fri, 02 Oct 2009 15:18:42 +0000

I don't necessarily agree with the hard/fast conclusion that a firm should shutdown when P=AVC. I think that a company, at that point, needs to do some quick and definiate cost cutting measures to lower the AVC in the short term and work toward a longer term strategy of keeping costs low but, it's not completely a lost cause at that point. When P < AVC (or worse yet, < AFC) is when a company should, as my Econ Prof says, "shut down, go home, and watch Oprah."

By: JMG

JMG — Fri, 27 Mar 2009 02:38:20 +0000

The charts were hard to decipher, thanks for the commentary for the added clarity.

By: barry econ

barry econ — Mon, 16 Mar 2009 19:09:58 +0000

A bit more information is coming out on the monopoly so check the date of this comment in the archive.

By: barry econ

barry econ — Sun, 16 Nov 2008 02:52:13 +0000

I'll check some notes and see if there's something. can't think of it at the top of my head.