If a profit-maximizing firm shuts down in the short run, it must be true that before the shutdown, at all positive output levels,
A) average total cost was less than average variable cost
B) fixed cost was greater than total revenue
C) variable cost was greater than total revenue
D) profit was zero
E) total cost plus total revenue was less than profit

Question

Quizplus · Accepted Answer

In the short run, a firm will shut down if the total revenue is less than the variable cost, as it cannot cover its variable costs, leading to losses greater than its fixed costs.

If a Profit-Maximizing Firm Shuts Down in the Short Run