What is the diference between a fim\'s shutdown point in the short run and its e

Question

What is the diference between a fim's shutdown point in the short run and its exit point in the long run? In the short run, a firm's shutdown point is the minimum point on the O A. average variable cost curve, while in the long run, a firm cannot exit O B. marginal cost curve and and in the long run, a firm's exit point is the minimum point on the marginal cost curve O C. average total cost curve and in the long run, a firm's exit point is the minimum point on the average total cost curve O D. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average fixed cost curve O E. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average total cost curve. Vfhy are ims vwilling to accept losses in the short run but not in the long run? O A. Sunk costs are larger in the long run than in the short run O B. There are fixed costs in the short run but not in the long run C. Firms cannot shut down in the short run O D. Fims are price takers in the short run but not in the long run O E. It is always profitable to incur losses in the short run because profits will always arise in the long run.

Explanation / Answer

Option E is correct response here

In short run firm treats fixed cost as a sunk cost hence the production of firm is meant to cover atleast variable cost in the begining therefore minumum point for shut down will be on the Average variable cost curve where as ini the long run Fixed cost is recoverd and hence Average total cost will be considered when minimum point for exit of th firm in this reference

Ans 2)

Firms are willing to accpet losses in short run because no matter what there are paltry chances of recovering fixed ost component in short period whereas in long run fixed cost is already recovered

Hence firm can afford to incur losses in short run because on ly variable part of cost will be covered in short run production.

OPtion B is correct response

Ans for 1st Question

When firms are in short run their production will try to recvoer atleast Average Variable cost and if not then contingency such as shut down may incur.(Shut Down Point on Average Variable Cost)

When firms are in long run then production will try to recover atleast Average Total Cost if it is not acheivable then firm has no point in continuing the production hence exit.(Exit point on Average Total Cost)

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