If a Firm Shuts Down in the Short Run

question 75

Multiple Choice

If a firm shuts down in the short run

• A) it will lose its operating costs.
• B) its losses will be equal to zero.
• C) it will incur its fixed costs.
• D) it will incur only its explicit costs.

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Definitions:

Quick Ratio

A financial metric that measures a company's ability to cover its current liabilities with its most liquid assets, excluding inventory.

Vacation Pay Payable

A liability account that records the amount of vacation pay owed to employees but not yet paid.

Current Liability

Financial obligations a company is required to pay within a year.

Product Warranty Expense

Costs associated with repairing or replacing defective products under warranty.