When a firm shuts down because the market price of its product is less than its average variable cost of producing that product, it suffers a loss equal to

Question

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When a firm shuts down because the market price is less than its average variable cost, it still has to cover its total fixed costs. The firm doesn't incur variable costs because it stops production, but it cannot avoid fixed costs like rent or salaries.

When a Firm Shuts Down Because the Market Price of Its