Explain Why a Firm Can Continue to Operate in the Short

question 163

Essay

Explain why a firm can continue to operate in the short run when it cannot cover its average total costs but in the long run must shut down.

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Definitions:

Revenue Expenditures

Costs that are charged to expense as incurred and are primarily associated with the maintenance and repair of fixed assets or for benefits within the current period.

Intangible Asset

An asset that lacks physical substance, such as patents, trademarks, and copyrights, holding value for a business.

Land

A non-depreciable asset representing the earth's surface that a business owns for operation purposes.

Intangible Asset

An Intangible Asset is a non-physical asset possessed by a company, such as intellectual property, goodwill, and licenses, offering future economic benefits.