Let us suppose Harry's,a local supplier of chili and pizza,has the following revenue and cost structure:

Question

Quizplus · Accepted Answer

To determine whether Harry's should stay open or shut down in the short run, we need to compare the total revenue with the total variable cost. 
Total revenue = Price x Quantity = $10 x 100 = $1,000
Total variable cost = Cost per unit x Quantity = $6 x 100 = $600
Total fixed cost = $400
Total cost = Total fixed cost + Total variable cost = $800
Total revenue is greater than the total variable cost, which means that Harry's is covering all its variable costs and making a contribution towards its fixed costs. Thus Harry's should continue to operate in the short run.

Let Us Suppose Harry's,a Local Supplier of Chili and Pizza,has