In the short term a firm will produce provided the revenue ?
Correct answer: B. covers variable costs
- A. covers fixed costs
- B. covers variable costs
- C. covers total costs
- D. covers revenue
Explanation
In the short run, fixed costs must be paid even if output is zero, so production should continue when revenue covers variable costs. If revenue does not cover variable cost, shutting down minimises the loss.
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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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