When Determining Whether to Shut Down in the Short Run

question 138

Multiple Choice

When determining whether to shut down in the short run, a competitive firm should ignore (i)
Fixed costs.
(ii)
Variable costs.
(iii)
Sunk costs.

• A)(iii) only
• B)(i) and (iii) only
• C)(ii) only
• D)(i), (ii), and (iii)

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Definitions:

Technology

The application of scientific knowledge for practical purposes, especially in industry, which includes machinery, equipment, methods, and processes.

Cost-benefit Constraint

A principle that considers whether the cost of implementing a decision outweighs the benefits derived from it.

Disclosure

The process of making essential financial information known to shareholders, regulators, and the public.

Benefits

Various forms of value, such as health insurance and retirement plans, provided to employees in addition to their salaries.