A seafood restaurant in a beach resort town has fixed (unavoidable) costs of $ 1,000 per month and variable (avoidable) costs of another $1,000 per month. Its total revenues over the six warm months amount to $17,000, so that its profit for this period is $5,000. Its total revenues over the other six cold months are only $7,000, however, so that it loses $5,000 over those months, and just breaks even over the year as whole. a Wouldn't the restaurant do better by staying closed out of season?

Suppose a firm's costs are C(q) = 100 + 10q - 6q2 + 3q3. At what cost will it shut down, given that all its fixed costs are sunk?