If a firm shuts down in the short run and produces no output, its total cost will be: a. equal to the fixed cost. b. equal to only explicit costs. c. equal to the sum of implicit and explicit costs. d. equal to the variable cost. e. equal to zero.

A. equal to the fixed cost.

Explanation:

A fixed cost is explained to change over the short-term, this is seen even if the company that is affiliated to this experiences changes in its sales or reports on other activities. This type of cost tends to instead be associated with a period of time, such as a rent payment in exchange for a month of occupancy, or a salary payment in exchange for two weeks of services by an employee. Business caught up in stiff-necked scenarios of this kind are likely to maintain high different forms or revenue generation methods. These charges could come in forms of salaries, rents, property taxes, insurances and a whole lot more others which are channeled to workers irrespective of their hours of work in the organisation.

Amortization. This is the gradual charging to expense of the cost of an intangible asset (such as a purchased patent) over the useful life of the asset.

Depreciation. This is the gradual charging to expense of the cost of a tangible asset (such as production equipment) over the useful life of the asset.

Insurance. This is a periodic charge under an insurance contract.

Interest expense. This is the cost of funds loaned to a business by a lender. This is only a fixed cost if a fixed interest rate was incorporated into the loan agreement.

Property taxes. This is a tax charged to a business by the local government, which is based on the cost of its assets.

Rent. This is a periodic charge for the use of real estate owned by a landlord.

Salaries. This is a fixed compensation amount paid to employees, irrespective of their hours worked.

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