Use the following scenario to answer the following questions: Chuck Diesel Burger is a food truck in Houston, Texas

At price of $2.00, Chuck Diesel Burger will shut down

A firm will shut-down its operations if the price that it receives for its commodity is less than the average variable cost. As given, Chuck Diesel Burger's minimum average total cost (ATC) is $3.75, and that its minimum average variable cost (AVC) is $2.50.

If the price is equal to 4 dollars, then the firm will not shut-down as it is covering its variable cost. Similarly, If the price is equal to 3.75 or 3 dollars, then the firm will not shut-down as it is earning enough to cover its variable cost.

On the contrary, if the price is equal to 2.50 dollars, the firm's price is just enough to cover the average variable cost. As a result, the firm is indifferent whether to shut-down temporarily or continue.

At a price equal to 2 dollars, it is not beneficial for the firm to continue its business and, therefore, it shuts its business.

Hence, at a price equal to 2 dollars, the firm will decide to shut-down its operations.