Because fixed costs must be paid regardless of whether a firm operates they should not be considered in deciding whether to produce or shut down.
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Perfect competition - Wikipedia revenue to cover its variable costs.[20] The rationale for the rule is straightforward: By shutting down a firm avoids all variable costs.[21] However, the firm must still pay fixed costs.[22] <span>Because fixed costs must be paid regardless of whether a firm operates they should not be considered in deciding whether to produce or shut down. Thus in determining whether to shut down a firm should compare total revenue to total variable costs (VC) rather than total costs (FC + VC). If the revenue the firm is receiving is grea
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