When Determining Whether to Shut Down in the Short Run

question 523

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:

Receivable Turnover

A financial ratio that measures how efficiently a company uses its assets by calculating how many times a company can turn its accounts receivable into cash during a period.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, calculated as (Cash + Marketable Securities + Receivables) / Current Liabilities.

Increased

This term denotes a situation or quantity that has become larger or greater in size, amount, number, or degree.

Direction

In finance, it refers to the trend or movement of market prices or interest rates.