Question

Suppose a firm is considering producing zero units of output. We call this exiting an industry in the short run and shutting down in the long run. Is this statement true or false?

1) True
2) False

Answer 1

In the short run, a firm can choose to exit an industry by producing zero units of output. However, it will still have to pay for its fixed costs, resulting in losses.

Step-by-step explanation:

In the short run, a firm can choose to exit an industry by producing zero units of output.

However, even if the firm produces zero units of output, it will still have to pay for its fixed costs. This means that the firm will still incur losses, as its revenue will be zero but its fixed costs will remain. Therefore, the statement is true.