JAMB Exam > JAMB Videos > Economics for JAMB > The Shutdown Point
The Shutdown Point Video Lecture | Economics for JAMB
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FAQs on The Shutdown Point Video Lecture - Economics for JAMB
| 1. What is the shutdown point in economics? |  |
Ans. The shutdown point in economics refers to the production level at which a firm is unable to cover its variable costs, resulting in temporary or permanent closure of operations. At this point, the firm is not generating enough revenue to cover the variable costs required to produce goods or services.
| 2. How is the shutdown point determined? | |
Ans. The shutdown point is determined by comparing the firm's variable costs with its total revenue. If the total revenue is less than the variable costs, the firm has reached its shutdown point. In other words, if the firm cannot generate enough revenue to at least cover the variable costs, it is not economically viable to continue operations.
| 3. What are variable costs? | |
Ans. Variable costs are expenses that change in direct proportion to the level of production or output. These costs include raw materials, direct labor, and other inputs that vary with the quantity of goods or services produced. Variable costs increase as production increases and decrease as production decreases.
| 4. What happens when a firm reaches its shutdown point? | |
Ans. When a firm reaches its shutdown point, it faces a decision to temporarily or permanently cease operations. Temporary shutdowns may occur when the firm anticipates that market conditions will improve in the future, allowing them to resume production. Permanent shutdowns, on the other hand, result in the complete closure of the firm due to long-term unprofitability.
| 5. How does the shutdown point relate to the break-even point? | |
Ans. The shutdown point and the break-even point are related concepts in economics. The break-even point is the production level at which a firm's total revenue equals its total costs, including both variable and fixed costs. The shutdown point occurs when the firm's total revenue falls below its variable costs. In other words, the shutdown point is a level of production below the break-even point, indicating that the firm is unable to cover its variable costs.
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Dec 23, 2024 Last updated |
Video Description: The Shutdown Point for JAMB 2024 is part of Economics for JAMB preparation.
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