In the short run, a firm operating in a perfectly competitive market will most likely avoid shutdown if it is able to earn sufficient revenue to cover which of the following costs?
Shutdown is defined as a situation in which the firm stops production but still confronts the payment of fixed costs in the short run. In the short run, a business can operate at a loss as long as it covers its variable costs even though it is not earning sufficient revenue to cover fixed costs. If variable costs cannot be covered in the short run, the firm will shut down operations and simply absorb the unavoidable fixed costs.