If a firm shuts down in the short run,then
A)total revenue and total cost drop to zero
B)total revenue drops to zero,but the firm must still pay its fixed cost
C)total revenue drops to zero,but the firm must still pay some variable cost
D)total cost drops to zero,but the firm still earns some residual revenues
E)neither total revenue nor total cost drops to zero

Question

Quizplus · Accepted Answer

If a firm shuts down in the short run, it means that it is temporarily ceasing its production due to its inability to cover its variable costs. In this case, its total revenue drops to zero, but it still needs to pay its fixed costs (e.g. rent, property taxes, salaries of permanent employees) regardless of its production level or status. Therefore, the best choice is B, which states that total revenue drops to zero, but the firm must still pay its fixed cost.

If a Firm Shuts Down in the Short Run,then