#cfa #cfa-level-1 #economics #reading-15-demand-and-supply-analysis-the-firm #section-3-analysis-of-revenue-costs-and-profit
| Revenue–Cost Relationship | Short-Run Decision | Long-Term Decision |
|---|
| TR ≥ TC | Stay in market | Stay in market |
| TR > TVC but TR < TFC + TVC | Stay in market | Exit market |
| TR < TVC | Shut down production to zero | Exit market |
|
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When total revenue is enough to cover total variable cost but not all of total fixed cost, the firm can survive in the short run but will be unable to maintain financial solvency in the long run.
Exhibit 21
<span>Revenue–Cost Relationship Short-Run Decision Long-Term Decision TR ≥ TC Stay in market Stay in market TR > TVC but TR < TFC + TVC Stay in market Exit market TR < TVC Shut down production to zero Exit market
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