Author Question: If revenue in the short run is less than variable costs, what should the firm do?? What will be ... (Read 120 times)

altibaby · **on:** Jun 29, 2018

If revenue in the short run is less than variable costs, what should the firm do??

What will be an ideal response?

Question 2

What does it mean if an industry has external economies?

What will be an ideal response?

sarahccccc · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The firm should shut down to minimize losses (i.e., loss equal to fixed costs only).

Answer to Question 2

There are external economies in an industry if long-run average costs fall as the size of the industry increases.