A Firm Will Shut Down in the Short Run If

question 64

Multiple Choice

A firm will shut down in the short run if

• A)MR < AVC.
• B)MR > AVC.
• C)AVC < AFC.
• D)P > MC.

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Definitions:

Direct Labor

The cost of wages for employees who directly manufacture products or provide services, considered a variable cost in production.

Direct Materials

Raw materials that can be directly attributed to the production of finished goods and are an integral part of the finished product.

Period Cost

Expenses incurred during a specific period of time that are not directly tied to the production of goods or services.

Prime Costs

consists of the direct costs directly attributable to the manufacture of goods, specifically direct materials and direct labor.