A short-run loss occurs when a firm's total revenue is less than its total cost, but it continues to operate in the short run.
Imagine you have a lemonade stand and on a rainy day, you sell fewer cups of lemonade than your costs. Even though you're losing money, you decide to keep the stand open because you hope for better weather and more customers in the future.
Short-run shutdown: This term refers to a situation where a firm temporarily stops production due to incurring losses that are greater than its fixed costs.
Long-run equilibrium: This term describes a state where all firms in an industry are earning zero economic profit and there is no incentive for firms to enter or exit the market.
Marginal cost: This term represents the additional cost incurred by producing one more unit of output.
Study guides for the entire semester
200k practice questions
Glossary of 50k key terms - memorize important vocab
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.