Question

If the present value of all future profit is positive, then Question 4 options: A) the firm should shut down if it is earning a negative profit in the short run. B) the firm should remain operating, even if it earns negative profit in the short run. C) the firm should shut down if it cannot cover its fixed costs in the short run. D) None of the above.

Answer 1

The answer is option A.

If the present value of all future profit is positive, then the firm should remain operating, even if it earns negative profit in the short run.

Step-by-step explanation:

Present value of future profit is positive means the firm will earn profit in future. Hence in short run the firm should operate even if the firm faces loss. Therefore, option A is correct.