A firm will shut down in the short run if ?
Correct answer: C. variable costs exceed revenues
- A. fixed costs exceed revenues.
- B. it is suffering a loss.
- C. variable costs exceed revenues
- D. total costs exceed revenues
Explanation
In the short run, a firm shuts down when revenue cannot cover variable costs, because fixed costs must be paid even when output is zero. Thus the shutdown condition is total variable costs exceeding total revenue.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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