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\begin{tabular}{l} If a firm shuts down in the short run and produces no \\ output, its total cost will be \\ \hline zero \\ \hline equal to total variable cost \\ \hline equal to total fixed cost \\ \hline equal to explicit costs only \\ \hline impossible to calculate \end{tabular}

Ask by Ellis Wade. in the United States
Mar 14,2025

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When a firm shuts down in the short run and produces no output, its total cost is equal to its total fixed cost.

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When a firm shuts down in the short run, it may stop producing output but still incurs fixed costs like rent, salaries, and other contractual obligations. Therefore, its total cost in this scenario will be equal to total fixed cost, which remains constant regardless of the production level. So, the firm will continue to pay these costs even when it isn't generating revenue. In practice, businesses often face tough decisions about shutting down operations temporarily due to economic downturns or off-seasons. Understanding the difference between fixed and variable costs can help leaders make informed choices, allowing them to balance financial obligations while exploring ways to remain viable until circumstances improve again.

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