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In the short run, a firm shuts down when: a
In the short run, a firm shuts down when:
a. profit is negative
b. TR < TVC
c. MRP > ARP at the level of labor usage where MRP = w
d. both b and c
e. all of the above
Expert Solution
The answer is: b. TR < TVC
A firm will exit the market temporarily in the short run if the price is less than the minimum average variable cost [Math Processing Error](P<AVC) or when the firm is not making enough revenue to cover its total variable costs [Math Processing Error](TR<TVC).
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