If a firm is not covering the cost of all resources employed by the firm (including the opportunity cost of resources owned by the firm), it will generally
A) go out of business in the long run.
B) remain in business as long as the current conditions are unchanged.
C) experience an increase in its stock price because investors will be attracted to it.
D) attempt to expand the size of its operation.

Question

Quizplus · Accepted Answer

If a firm is not covering the cost of all resources employed by the firm, including the opportunity cost, it is not generating enough revenue to sustain its operations. In the long run, this will lead to financial insolvency and bankruptcy, causing the firm to go out of business.

If a Firm Is Not Covering the Cost of All