If a firm shuts down in the short run and produces no output, its total cost will be
A)zero
B)equal to total variable cost
C)equal to total fixed cost
D)equal to explicit costs only
E)impossible to calculate

Question

Quizplus · Accepted Answer

In the short run, a firm has both fixed costs and variable costs. Fixed costs are those that the firm must pay regardless of the level of output, such as rent for its facilities or loan payments on its equipment. Variable costs, in contrast, are tied to the level of output and increase or decrease with it. If a firm shuts down in the short run and produces no output, it will still incur its fixed costs. Therefore, its total cost will be equal to its total fixed cost.

If a Firm Shuts Down in the Short Run and Produces