-The figure above shows a perfectly competitive firm. The firm will shut down in the short run if total fixed costs

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will shut down if it cannot cover its variable costs. Fixed costs are irrelevant to the shutdown decision in the short run, as they are sunk costs. Therefore, the firm will shut down if it cannot cover its variable costs, regardless of the level of fixed costs.

-The Figure Above Shows a Perfectly Competitive Firm