Which of the following is true if a firm shuts down?
i.The price is less than minimum average variable cost.
ii.The firm is able to avoid an economic loss.
iii.The firm incurs a loss equal to its total variable cost.
A) i only
B) i and ii
C) i and iii
D) iii only
E) ii only

Question

Quizplus · Accepted Answer

If a firm shuts down, it means the price is less than the minimum average variable cost, making it unprofitable to continue production. The firm cannot avoid an economic loss by shutting down; it only avoids further losses beyond fixed costs. The loss incurred is equal to its total fixed costs, not total variable costs.

Which of the Following Is True If a Firm Shuts