A firm will not shut down in the short run so long as it is covering its variable costs.

Question

Quizplus · Accepted Answer

In the short run, a firm may choose to continue operating as long as it is able to cover its variable costs. This is because shutting down completely may lead to additional costs, such as paying lease or loan payments on equipment or losing valuable employees who may find other work during the shutdown period. However, if the firm is not able to cover its fixed costs in the long run, it may ultimately choose to shut down or go out of business.

A Firm Will Not Shut Down in the Short Run