Profit, Loss, Shutdown

A price-taking firm produces where price equals marginal cost, so the marginal cost curve tells the whole short-run story once the two average curves are drawn across it. Where MC crosses AC is the break-even point: at any price above it the firm earns a profit, and at exactly that price it earns nothing. Where MC crosses AVC is the shutdown point.

Between the two points the firm makes a loss but covers its variable costs and some of its fixed costs, so it keeps operating in the short run. Below the shutdown point it cannot even cover variable costs and shuts down at once. The slider changes the fixed cost, which lifts AC away from AVC and moves the break-even point; the shutdown point does not move, because fixed cost is not in AVC.