A firm should always shut down if its revenue is
A) declining.
B) less than its average fixed costs.
C) less than its total costs.
D) less than its avoidable costs.

Question

Quizplus · Accepted Answer

A firm should shut down in the short run if the revenue it would earn from producing is less than its avoidable costs, also known as variable costs. If it cannot cover these costs, it loses less money by not operating. Choices A, B, and C do not necessarily indicate conditions under which a firm should always shut down.

A Firm Should Always Shut Down If Its Revenue Is