(a) Previously, while deriving the supply curve, we have discussed that in the short run the firm continues to produce as long as the price remains greater than or equal to the minimum of AVC. Therefore, along the down, the last price-output combination at which the firm produces positive output is the point of minimum AVC where the SMC curve cuts the AVC curve. Below this there will be no production. This point is called tiTe short run shutdown point of the firm. In the long run, however, the shut down point is the minimum of LRAC curve.
(b)
