If a firm shuts down in the short run, it will:
A) incur losses equal to its fixed costs.
B) produce at the output level where MC = MR.
C) reduce its losses to zero.
D) do this because P AVC.
E) have total revenue greater than total fixed costs.

Question

If a firm shuts down in the short run, it will:
A) incur losses equal to its fixed costs.
B) produce at the output level where MC = MR.
C) reduce its losses to zero.
D) do this because P > AVC.
E) have total revenue greater than total fixed costs.

Quizplus · Accepted Answer

If a firm shuts down in the short run, it will still incur its fixed costs, even though it is not producing any output. Therefore, the firm's losses will be equal to its fixed costs.

If a Firm Shuts Down in the Short Run, It