in the the longrun, a firm must shut down if its average revenue is?
Answer Details
A firm should shut down in the long run if its average revenue is less than its average cost. In other words, if the firm is not making enough revenue to cover its costs, it will eventually go out of business.
There are different types of costs associated with running a business, including fixed costs (which don't vary with the level of output) and variable costs (which do vary). The minimum average cost refers to the point at which the firm is producing output at the lowest possible average cost.
If the firm's average revenue is less than its average variable cost, then it is not even covering the cost of producing each unit of output, let alone covering the fixed costs. In this case, the firm should shut down in the short run, and definitely in the long run if it continues to operate at a loss.
If the firm's average revenue is equal to the minimum average cost, it is just breaking even, but not making any profit. In the long run, it might be better for the firm to shut down and invest its resources in a more profitable venture.
Therefore, a firm should shut down in the long run if its average revenue is less than its average cost, which means that it is not generating enough revenue to cover all of its costs.