If a firm operating in a competitive industry shuts down in the short run, it can avoid paying
A)fixed costs.
B)variable costs.
C)total costs.
D)The firm must pay all its costs, even if it shuts down.

Question

Quizplus · Accepted Answer

In the short run, a firm can avoid paying variable costs by shutting down, as these costs are directly tied to production. Fixed costs, however, must still be paid regardless of production status.

If a Firm Operating in a Competitive Industry Shuts Down