If a Firm Shuts Down in the Short Run, Then

question 339

Multiple Choice

If a firm shuts down in the short run, then

• A) its economic profits are zero.
• B) its losses are equal to its fixed costs.
• C) its fixed costs are greater than its variable costs.
• D) it must be the case that its revenues from operating were less than its total costs.

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Definitions:

Budgeted Units

The quantity of products or services that a company plans to sell or produce within a specific period, as outlined in its budget.

Actual Costs

The real costs incurred in the production of goods or services, including all expenses direct and indirect.

Materials Price Variance

The difference between the actual cost of materials and the expected cost, multiplied by the amount of materials purchased.

Standard Price

A predetermined cost that companies use to value inventory and cost of goods sold, often used in budgeting and performance evaluation.