If a restaurant in a summer tourist area is highly profitable during the summer months but unable to cover even its variable costs during the winter months, the restaurant should
A) go out of business immediately, because no firm should continue to operate if it is losing money; doing so is contrary to the idea of profit maximization.
B) go out of business as soon as the summer is over; losses should never be tolerated.
C) operate during all months of the year as long as its profits during the summer exceed its losses during the winter.
D) shut down during the winter, but continue operating during the summer as long as the summer profits exceed the losses (fixed costs) during the winter shutdown period.

Question

Quizplus · Accepted Answer

The restaurant should shut down during the winter to avoid incurring variable costs it cannot cover, but continue operating in the summer if the summer profits exceed the fixed costs incurred during the winter shutdown.

If a Restaurant in a Summer Tourist Area Is Highly