Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run.

Question

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In the short run, a firm may decide to produce zero units of output and temporarily cease operations, which is referred to as shutting down. In the long run, if a firm decides to permanently cease operations and leave the market, it is considered exiting the industry. The distinction lies in the time frame and permanence of the decision.

Suppose a Firm Is Considering Producing Zero Units of Output