Question

"In the short run, if I can cover my variable costs, I will continue to produce, ignoring my fixed costs. If I cannot cover my variable costs, I will shut down to minimize losses." Is this statement accurate?

Answer 1

Correct.

Step-by-step explanation:

The fixed cost are fixed in the short-run but i nthe long-run all cost are variable as we can decide to don't do a new lease for the machinery once it finish the current one, to move to another place to reduce the rent expense or not purchase an insurance that among other are example of fixed cost that the company can change in the long run.

now, in the short-run we will continue if there is a positive contribution that is, when we pay a portion of the fixed cost with the activities of the firm That way it is better t okeep it open an decrease the loss than closed and pay the full amount of fixed cost