If a firm stops production, its:
A)fixed costs rise.
B)total costs may increase or decrease.
C)variable costs drop to zero.
D)All are correct.

Question

Quizplus · Accepted Answer

When a firm stops production, its variable costs, which are costs that vary with the level of output (such as raw materials, labor directly involved in production, etc.), drop to zero because no production is taking place. Fixed costs, such as rent, salaries of permanent staff, and insurance, remain unchanged regardless of the level of production.

If a Firm Stops Production, Its