If price is between the break-even point and the shutdown point,in the short run the firm will

Question

Quizplus · Accepted Answer

If price is between the break-even point and the shutdown point, the firm will still be able to cover its variable costs and make some contribution towards fixed costs, even if it is not making a profit. Therefore, it is better for the firm to continue to operate in the short run rather than shutting down, which would result in a loss equivalent to fixed costs. So, the best choice is A, i.e. operate.

If Price Is Between the Break-Even Point and the Shutdown