The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-A firm will shut down permanently if total revenue is not sufficient to pay for total costs in the long run.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-A firm will shut down permanently if total revenue is not sufficient to pay for total costs in the long run.

Quizplus · Accepted Answer

In the long run, a firm will shut down permanently if it is unable to cover all its costs, including both fixed and variable costs, with its total revenue. This is because in the long run, there are no fixed costs; all costs are variable, and if the firm is unable to cover them with its revenue, it will not be able to sustain its operations. Therefore, the statement is true.

The Figure Given Below Shows the Aggregate Demand and Supply