Question

If a firm shuts down in the short run market period and produces no output, its total cost is _______.

• A. Zero
• B. Equal to variable
• C. Equal to fixed cost
• D. Explicit costs only

Answer 1

Answer: (C)

Equal to fixed cost

A short run shutdown is designed to be temporary. When a firm is a shutdown for the short run, it still has to pay fixed costs and cannot leave the industry. However, a firm cannot incur losses indefinitely. Exiting an industry is a long-term decision.