Shutdown Condition
A firm operates in the short run only if price covers average variable cost, ; otherwise it shuts down. Fixed costs are sunk, so losses are tolerated as long as variable costs are covered.
See Topic 2.
A firm operates in the short run only if price covers average variable cost, ; otherwise it shuts down. Fixed costs are sunk, so losses are tolerated as long as variable costs are covered.
See Topic 2.