Should a firm shut down if its weekly revenue is 1000 its va

Should a firm shut down if its weekly revenue is ?$1,000 its variable cost is ?$600 and its fixed cost is ?$1,500 of which ?$250 is avoidable if it shuts? down? ? Why?

The firm should

A. produceproduce because revenue of ?$1,000 is greatergreater than avoidable costs.

B. produceproduce because revenue of $1,000 is greatergreater than variable costs.

C. shut downshut down because revenue of ?$1,000 is less than fixed costs.

D.produce because revenue is positive.

E.shut downshut down because because variable costs are lessless than fixed costs.

Solution

The firm should produce because revenue of 1000 is greater than the variable cost. A firm faces a shutdown point when the revenue is equal to or lower than the total variable cost. If the revenue is higher than the variable cost but lower than total cost, the firm is facing a loss but doesn\'t need to shut down.

The answer is \"B\".