In the short run a firm should shut down if it cannot
A)make normal profits.
B)make economic profits.
C)cover its variable costs.
D)cover its fixed costs.

Question

Quizplus · Accepted Answer

In the short run, a firm should shut down if it cannot cover its variable costs because it means that it is not even covering the cost of producing its goods or services. Continuing to operate would mean incurring further losses. While it would be ideal for a firm to make economic profits or cover its fixed costs, these are not necessary conditions for deciding whether to shut down in the short run. Making normal profits would only mean breaking even, which may not be sufficient to sustain the firm's operations.

In the Short Run a Firm Should Shut Down If