Answer to Question #130985 in Microeconomics for yasir

Question

“By definition, cost is zero if a firm does not hire any input. Hence cost-minimization essentially means shutting down the operation of the firm.” Do you agree with the statement? Justify you answer by giving an explanation from micro economic theory.

Answer 1

Yes,

In this case, the firm does not incur any input expenses to pay, the marginal cost will be very low hence the he firm does not make enough revenue to cater for the other variable costs and the fixed costs. This will force the firm to completely shut down its operations.