A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

Question

Quizplus · Accepted Answer

A firm will temporarily shut down when the price is so low that total revenue doesn't cover the total variable cost of production. This is because, in the short run, the firm must cover its variable costs to justify remaining in operation. Fixed costs are incurred regardless of production levels, so they don't factor into the short-run decision to produce or shut down.

A Firm Will Shut Down Temporarily When the Price Is