If a firm in a perfectly competitive market shuts down in the short run, it will:

A. have total revenue greater than its fixed costs.

B. have to do this because the price is more than the AVC.

C. lose money equal to its total fixed costs.

D. have no losses.

E, still be following the MC=MR rule.

Question

Theresa Gay

Business

8 June, 01:49

If a firm in a perfectly competitive market shuts down in the short run, it will:

A. have total revenue greater than its fixed costs.

B. have to do this because the price is more than the AVC.

C. lose money equal to its total fixed costs.

D. have no losses.

E, still be following the MC=MR rule.

+5

Answers (1)

Know the Answer?

Hezekiah Salinas · Answer 1

C. lose money equal to its total fixed costs.

Explanation:

The revenue of a firm in a perfectly competitive market depends on the forces of demand and supply. If such a firm consistently operates at a loss in the short run, it means that its price is lower than its average variable costs or revenues are lower than its total costs. If it shuts down, it won't be incurring variable costs but only lose money equal to fixed costs making choice C correct.

If a firm in a perfectly competitive market shuts down in the short run, it will:A. have total revenue greater than its fixed costs.B. have to do this because the price is more than the AVC.C. lose money equal to its total fixed costs.D. have no losses.E, still be following the MC=MR rule.