Asked by China lilian on May 02, 2024
Verified
Which statement is false?
A) A firm will shut down when variable cost is greater than total revenue.
B) In the long run all costs become variable costs.
C) When the firm shuts down,output is zero.
D) None of the statements are false.
Variable Cost
Costs that change in proportion to the level of production or business activity, such as raw materials or hourly labor.
- Acquire knowledge about the frameworks of short-run and long-run decision-making strategies in organizations.
- Recognize the factors influencing a business's decision to keep running, discontinue, or exit the field.
Verified Answer
SG
Sarvjeet GhotraMay 03, 2024
Final Answer :
D
Explanation :
All the statements provided are true. A firm will indeed shut down in the short run if the variable cost exceeds total revenue, as continuing operations would lead to greater losses than the fixed costs of shutting down. In the long run, all costs are considered variable because firms have the flexibility to adjust all inputs. When a firm shuts down, it ceases production, hence output is zero.
Learning Objectives
- Acquire knowledge about the frameworks of short-run and long-run decision-making strategies in organizations.
- Recognize the factors influencing a business's decision to keep running, discontinue, or exit the field.