As a rule, a firm should shut down if
A) total variable cost exceeds total revenue
B) total variable cost exceeds avrerage total cost
C) price exceeds average total cost
D) total revenue exceeds total cost

Question

Quizplus · Accepted Answer

A firm should shut down in the short run if the total revenue it would earn from producing and selling its product is less than its total variable costs. This is because, in the short run, the firm must cover its variable costs to justify remaining in operation. If it cannot, it minimizes its losses by shutting down.

As a Rule, a Firm Should Shut Down If