Whether a firm stays in business or shuts down depends heavily on the concept of

Question

Quizplus · Accepted Answer

Economic profit takes into account both explicit and implicit costs, which allows for a more complete understanding of a firm's profitability. If a firm is not generating positive economic profits, it may not be able to cover all of its costs over the long term, leading to a potential shutdown. Market share and concentration ratios may be important factors, but ultimately it is the profitability of the firm that determines its longevity. Actual profit is not as useful for decision-making as economic profit because it does not consider opportunity costs.

Whether a Firm Stays in Business or Shuts Down Depends