Asked by samuel morales on Jun 24, 2024
Verified
If the firm operates in the short run and goes out of business in the long run,then the price
A) must be between the shutdown point and the break-even point.
B) above the break-even point.
C) below the shutdown point.
D) may be anywhere.
Break-Even Point
The point at which total costs and total revenues are equal, resulting in no net loss or gain for a business.
Shutdown Point
The level of output and price at which a company's revenue just covers its variable costs, below which the company would lose more money if it continued to operate.
Short Run
A period in economic analysis where at least one input is fixed and cannot change, influencing decision-making and production.
- Understand the decision-making process of companies regarding continuation or cessation of business operations, influenced by the comparison between pricing and assorted expenses.
Verified Answer
NM
Nubia MendozaJun 30, 2024
Final Answer :
A
Explanation :
In the short run, if a firm decides to go out of business in the long run, it means that currently, the price is not high enough to cover all its costs in the long term. However, it is still operating because the price covers its variable costs and possibly some fixed costs, placing it between the shutdown point (where price equals variable costs) and the break-even point (where total costs are covered).
Learning Objectives
- Understand the decision-making process of companies regarding continuation or cessation of business operations, influenced by the comparison between pricing and assorted expenses.