A firm that shuts down temporarily has to pay
A)its variable costs but not its fixed costs.
B)its fixed costs but not its variable costs.
C)both its variable costs and its fixed costs.
D)neither its variable costs nor its fixed costs.

Question

Quizplus · Accepted Answer

When a firm shuts down temporarily, it still incurs fixed costs such as rent or loan payments, but it does not incur variable costs, which are costs that vary with production levels, such as raw materials and labor.

A Firm That Shuts Down Temporarily Has to Pay