Asked by garrett miles on Apr 24, 2024
Verified
If price is above the break-even point,in the short run the firm will _____ and in the long run the firm will ____.
A) shut down;stay in business
B) shut down;go out of business
C) operate;go out of business
D) operate;stay in business
Break-Even Point
The financial point where total costs and total revenues are exactly equal, meaning there is no profit or loss.
Short Run
In economics, a timeframe during which the production process has limitations due to fixed resources, leading to constraints on firm adjustments and outputs.
Long Run
The long run is a period in economics during which all factors of production and outputs are variable and can be adjusted, contrary to the fixed factors present in the short run.
- Recognize how firms decide to stay in business or shut down based on comparisons of price with various costs.
Verified Answer
PS
Patrycja SzymikMay 02, 2024
Final Answer :
D
Explanation :
If price is above the break-even point, the firm is generating profit and will continue to operate in the short run. In the long run, the firm will evaluate its profitability and may choose to expand or exit the market based on its overall performance. However, with the information given in the question, the firm will still stay in business as it is operating profitably in the short run.
Learning Objectives
- Recognize how firms decide to stay in business or shut down based on comparisons of price with various costs.