A business needs to make at least normal profit in the long run to justify remaining in an industry but in the short run a firm will produce as long as price per unit > or equal to average variable cost (AR = AVC). This is called the shutdown price in a competitive market.
Revision Video: Perfect Competition in the short run including The Shut Down Price
© 2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.