If a perfectly competitive business closes down in the short run:
A)its loss will be zero
B)it will realize a normal profit
C)it will realize a loss equal to its variable costs
D)it will realize a profit equal to its fixed costs
E)it will realize a loss equal to its fixed costs

Question

Quizplus · Accepted Answer

In the short run, if a perfectly competitive business shuts down, it still has to cover its fixed costs (such as rent, insurance, etc.), which it cannot avoid even if it's not operating. Therefore, the business will incur a loss equal to its fixed costs, as variable costs (like labor and raw materials) can be avoided by not producing any output.

If a Perfectly Competitive Business Closes Down in the Short