Loss: TR (pick one: >, =, MC, the firm should make more units ' 's earning a profit on each. If MRVC) then the firm is covering it's variable costs and there is additional revenue to partially or entirely cover the fixed costs. One the other hand, if the variable cost is greater than the revenue being made (VC>R) then the firm is not even covering production costs and it should be shutdown immediately. Implications of a Shutdown The decision to shutdown production is usually temporary. It does not automatically mean that a firm is going out of business. If the market conditions improve, due to prices increasing or production costs falling, then the firm can resume production. shutdowns are short run decisions. When a firm shuts down it still retains capital assets, but cannot leave the industry or avoid payi g its fixed costs A firm cannot incur losses indefinitely which impacts long run decisions. When a shutdown last for an extended period of time, a firm has to decide whether to continue to business or leave the industry. The decision to exit is made over a period of time. A firm that exits an industry does not earn any revenue, but is also does not incur fixed or variable costs. Part II: Graphing Perfect Compe n 7. A company's profit maximization is equal to the output rule. This is MR = 8. A firm's decision on how much to produce and whether to stay is business is based on profit. (Choose economic or accounting) 9. Profit can be determined in two ways: Profit = Total Revenue Total Costs ATR (this is price) ATC = price/quantity Protable: Price (pick one: >, =, , =, , :, , :, , =,