Shutdown (economics)

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In economics, shutdown occurs if marginal revenue is below average variable cost at the profit-maximizing output. Producing anything would not generate returns significant enough to offset any fixed cost and part of the variable cost. By not producing, the firm loses only the fixed cost.

[edit] See also

• Profit maximization
• Sunk costs

[edit] Further reading

• Business Objectives - The short run supply decision - the shut-down price