Final answer:
A shutdown is not the same as exiting the industry; a shutdown is often a short-term response to losses where the firm stops production but still pays fixed costs, whereas an exit is a long-term, permanent decision to cease operations.
Step-by-step explanation:
When a firm has chosen to shut down, it does not necessarily mean that it has exited the industry. This is because shutting down typically refers to a short-run decision where a firm stops production to avoid variable costs, despite still having to pay fixed costs. On the other hand, an exit refers to a long-run decision where the firm permanently ceases production and leaves the market, often due to sustained losses. Therefore, the answer is B) False.
It’s important to understand the difference between a shutdown and an exit in the context of business decisions. While both are responses to financial losses, a firm’s decision to shut down is often temporary and reversible, whereas exiting the industry is a more definitive and permanent action. The shutdown point is when a firm ceases current production to minimize losses but retains the option to resume operations if conditions improve.