Shut down point in the short run for a firm, even if it does not cover

✅ Explanation: In the short run, a firm should shut down if it cannot cover its variable costs. This is because fixed costs are sunk costs and cannot be recovered in the short run. If the firm can cover its variable costs, it can continue to operate and minimize its losses.

📌 Other Options Explanations:
-(a) Marginal returns: Marginal returns refer to the additional output produced by adding one more unit of input. While diminishing marginal returns can influence a firm's decision-making, they are not the direct determinant of the shutdown point.
-(b) Average cost: Average cost is the total cost divided by the quantity of output. While it's important for long-run decisions, in the short run, the focus is on covering variable costs to avoid further losses.
-(d) Marginal cost: Marginal cost is the cost of producing one additional unit of output. While it's important for determining the profit-maximizing level of output, in the short run, the firm's primary concern is covering its variable costs.

🔑Key Points:
-Variable cost is a production expense that increases or decreases depending on changes in a company’s manufacturing activity.
-The raw materials used as components of a product are considered variable costs because this type of expense typically fluctuates based on the number of units produced.
-Variable costs tend to change depending on output quantity.
-An increase in output elevates costs, while reduced output leads to a decrease in costs.​
Thus, we can conclude that the Cost of raw materials is a variable cost in the short run.
Additional Information
-Fixed costs remain the same regardless of production or manufacturing output.
-Therefore, variable costs could be considered direct costs of production volume, rising in response to the increase in production and decreasing with lower production.