Answer to Question #95358 in Economics for Wilson Pilane

Question

In a short run, when should a firm continue with production according to the shut down rule

Answer 1

In the short run,if a firm that operates with the negative profit (when the revenue is less that the total cost or the price is less than the unit cost) it has to decide to operate or temporarily shutdown. According to the shutdown rule, in a short run a firm should continue to operate if price exceeds average variable costs.