A firm's optimal output is 1,000 units per month,with a fixed cost of $300 per month and variable cost of $200 per month.The market price of this good is $0.40.The firm decides to shut down.In such a situation,this firm should ________.

Question

Quizplus · Accepted Answer

The firm covers its variable costs and contributes to fixed costs at the market price, so it should not shut down in the short run. Shutting down would mean bearing the total fixed cost without any revenue to offset it.

A Firm's Optimal Output Is 1,000 Units Per Month,with a Fixed