TSR Wiki > Study Help > Subjects and Revision > Revision Notes > Economics > Break even and close down
In the short run, a firm must cover its variable costs (i.e. price must be greater than or equal to average variable costs). If price is below AVC, the firm will go into liquidation. The point where P = AVC is the close down point of the firm.
In the long run, a firm must cover all its costs (i.e. price must be greater than or equal to average costs). This is the break even point.
In the short run, the marginal cost curve above the closedown point is the firm's supply curve.
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