If a perfectly competitive firm shuts down in the short run and exits the industry in the long run, the firm's short run condition is A) TR TC. B) TR TVC and TR

Question

If a perfectly competitive firm shuts down in the short run and exits the industry in the long run, the firm's short run condition is A) TR > TC. B) TR > TVC and TR < TC. C) TR < TVC. D) TR < TFC.

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will shut down if its total revenue (TR) is less than its total variable costs (TVC), because it cannot cover its variable costs of production.

If a Perfectly Competitive Firm Shuts Down in the Short