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The Shut-down Rule:When should a firm shut down in the face of economic losses?

The Shut-down Rule:When should a firm shut down in the face of economic losses?

This lesson illustrates two situations in which a firm in a perfectly competitive market is earning economic losses. In one case, the losses are less than the firm's total fixed costs. In another, the firm's losses exceed its fixed costs, meaning the firm is better off shutting down.

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