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

Question

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When a firm shuts down, it avoids incurring variable costs, so its loss is limited to fixed costs. Continuing to operate would result in a larger loss because the firm would incur both fixed and variable costs, exceeding the revenue from sales.

When a Firm Shuts Down Because the Market Price of Its