Assume a firm taking a loss will minimize that loss by shutting down rather than producing. Based on this, you know that if the firm were to produce its price would cover:
A) all of its costs.
B) all of its variable costs and some of its fixed costs.
C) part of its variable costs and none of its fixed costs.
D) none of the above.

Question

Quizplus · Accepted Answer

If a firm shuts down, it means that the price does not cover the variable costs. If it were to produce, it would cover part of its variable costs but none of its fixed costs, leading to a greater loss than shutting down.

Assume a Firm Taking a Loss Will Minimize That Loss