In the short run, a firm should shut down if its economic loss from operating exceeds its total fixed cost.

Question

Quizplus · Accepted Answer

In the short run, a firm should continue operating if its revenue covers its variable cost, even if it is experiencing an economic loss (where revenue is less than total cost, including fixed costs). However, if the economic loss from operating exceeds the total fixed cost, then the firm would be better off shutting down and minimizing its losses.

In the Short Run, a Firm Should Shut Down If