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Produce or Shut Down

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The solution determines if the company should produce or shut down in the next year.

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Short run costs/variable and total revenue

7) Each of the following situations could exist for a firm in the short run. In each case, indicate whether the firm should produce in the short run or shut down in the short run, or whether additional information is needed to determine what it should do in the short run.

a) a. Total cost exceeds total revenue at all output levels.

b) b. Total variable cost exceeds total revenue at all output levels.

c) Total revenue exceeds total fixed cost at all output levels.

d) d. Marginal revenue exceeds marginal cost at the current output level.

e) Price exceeds average total cost at all output levels.

f) Average variable cost exceeds price at all output levels.

g) Average total cost exceeds price at all output levels.

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