What is the lowest price at which this firm might choose to operate?

The lowest price at which a firm might choose to operate is typically determined by its average variable costs (AVC). If the price falls below this level, the firm would incur losses greater than its fixed costs by continuing production. Therefore, to minimize losses, the firm may decide to shut down if the market price does not cover at least its AVC. In the short run, the shutdown point occurs where price equals the minimum AVC.