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Fixed costs are irrelevant in the decision about whether to shut down production in the short run because fixed costs: do not|If a profit-maximizing perfectly competitive firm shuts down in the short run, it incurs no losses. it incurs an economic loUnder which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short run? wheneIn the short run, a perfectly competitive firm will produce positive output if marginal revenue equals marginal cost and tota

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Answer #1

Ans.1- (A)

Fixed costs remain same for every quantity the firm produces so they are not considered making production decsions.

Ans.2- (B)

If firm shuts down , then output produced = 0. So, total revenue = P*Q = 0. Hence , profits = TR- TC = 0- TFC = -TFC.

Note that at Q= 0, TC = TFC

Ans.3-(B)

Firm will shut down when it is not able to cover its minimum average variable cost.

Ans.4- (D)

If you have any doubt feel free to ask.

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