A firm should shut down in the short run if it s revenue is smaller than its variable costs.

Question

Quizplus · Accepted Answer

In the short run, a firm should only continue to operate if its revenue is greater than its variable costs. If revenue is less than variable costs, the firm is not even covering its variable costs and therefore it would incur losses by continuing to operate. It would be better for the firm to shut down in the short run and minimize losses.

A Firm Should Shut Down in the Short Run If