Asked by Paige Partin on May 02, 2024
Verified
In the short-run,a firm's decision to shut-down should not take into consideration
A) Avoidable costs
B) Variable costs
C) Fixed costs
D) Marginal costs
Avoidable Costs
Costs that you get back if you shut down operations.
Variable Costs
Costs that vary directly with the level of production or sales volume, such as raw materials or labor expenses.
Fixed Costs
Business expenses that remain constant regardless of the level of production or sales activity, such as rent, salaries, and insurance.
- Understand short-run and long-run decision-making processes for operational and investment purposes.
Verified Answer
NQ
Nguy?n QuangMay 02, 2024
Final Answer :
C
Explanation :
In the short-run, a firm's decision to shut down should not take into consideration fixed costs because these costs are incurred regardless of the firm's level of production. Fixed costs are sunk costs in the short run, meaning they cannot be recovered whether the firm operates or not.
Learning Objectives
- Understand short-run and long-run decision-making processes for operational and investment purposes.