Suppose a firm is collecting $1,250 in total revenues and the total costs of its variable factors of production are $1,000 at its current level of output.The firm has $500 in fixed costs.In the short run,one can predict that the firm will ____ and in the long run the firm will _____.

Question

Quizplus · Accepted Answer

In the short run the firm must pay fixed costs whether it operates or not.As long as the firm is covering its variable costs in the short run it will operate even if profit is negative.But if it is earning negative profits it will exit in the long run when it no longer has fixed costs.

Suppose a Firm Is Collecting $1,250 in Total Revenues and the Total