In the Short Run, a Firm Should Shut Down Its

question 181

Multiple Choice

In the short run, a firm should shut down its operation if:

• A) its losses are less than TFC at the MR = MC point.
• B) its losses equal TFC at the MR = MC point.
• C) its losses are greater than TFC at the MR = MC point.
• D) TR is less than TC.
• E) TR exceeds TVC.

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Definitions:

Unused Capacity

The available production or service capacity that is not being used, often considered when planning production schedules and resource allocation.

Period Expense

Expenses that are not directly tied to the production process and are charged to the periods in which they are incurred.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual products or job orders, based on a related activity (e.g., machine hours or labor hours).

Predetermined Overhead Rate

A predetermined rate for allocating manufacturing overhead to products or job orders, established prior to the period by forecasting both overhead expenses and activity volumes.