If a firm stops production, then its:
A)variable costs decrease to zero.
B)fixed costs stay the same.
C)total costs decrease.
D)All of these are correct.

Question

Quizplus · Accepted Answer

When a firm stops production, its variable costs, such as labor and raw materials, decrease to zero because these costs are directly associated with the level of output. Fixed costs, such as rent and insurance, remain unchanged because they are incurred regardless of the level of production. Consequently, the total costs, which include both fixed and variable costs, decrease.

If a Firm Stops Production, Then Its