A firm will shut down in the long run if its earning is
ECONOMICS
WAEC 2011
A firm will shut down in the long run if its earning is
- A. less than normal profit
- B. greater than normal profit
- C. equal to super normal profit
- D. less than super normal profit
Correct Answer: A. less than normal profit
Explanation
The long run is a phase where all factors of production are variable and firms are able to adjust all costs. If its earnings are less than the normal profits, it will shut down. A firm should earn enough to cover its total cost per unit in order to remain in business.
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