Question

One would expect a firm to close down rather than continue producing in the short-period if ___________.

• A. total revenue were more than total variable cost
• B. total revenue were less than total variable cost
• C. variable costs were to fall below fixed costs
• D. variable costs were to rise above fixed costs

Answer 1

Answer: (B)

total revenue were less than total variable cost

One would expect a firm to close down rather than continue producing in the short-period if total revenue were less than the total variable cost. This means in short period firm should discontinue its production if TR<TVC.