If a struggling perfectly competitive furniture store in Detroit shuts down,it incurs an economic loss equal to its
A) marginal cost.
B) total fixed cost.
C) total variable cost.
D) average variable cost.
E) average total cost.

Question

Quizplus · Accepted Answer

When a perfectly competitive furniture store in Detroit shuts down, it can avoid variable costs (such as labor and materials) but still incurs its total fixed costs (such as rent, insurance, and equipment leases) because these costs are incurred regardless of the level of production. These fixed costs represent the economic loss the store faces upon shutting down.

If a Struggling Perfectly Competitive Furniture Store in Detroit Shuts