If a firm shuts down a factory so that its output is zero, which of the following costs will also be zero?

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BlackTom AI · Accepted Answer

First, consider what happens when a firm shuts down a factory so that output is zero. 
Option a: variable cost. Since variable costs depend on the level of output, with zero output there are no variable inputs being used, so variable costs are zero. This statement is correct. 
Option b: total cost. Total cost includes both fixed costs and variable costs. Even with zero output, fixed costs (like depreciation, rent, certain overheads) typically remain, so total cost does not necessarily drop to zero. This statement is incorrect. 
Option c: average cost. Average cost is total cost divided by quantity (output). With zero output, division by zero is undefined, so average cost cannot be determined and is not simply zero. This statement is incorrect. 
Option d: all of the above. Since options b and c are incorrect, this option is also incorrect. 
In summary, the only cost that necessarily becomes zero when output is zero is the variable cost, while fixed costs persist and total and average cost terms behave differently (undefined for average cost at zero output).

If a firm shuts down a factory so that its output is zero, which of the following costs will also be zero?

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