Wonder World is a competitive firm operating under the following conditions: Price of output is €12, the profit maximizing level of output is 60,000 units, and the total cost (full economic cost) of producing 60,000 units is €800,000.
The firm’s only fixed factor of production is a €1,000,000 stock of capital (a building). If the interest rate available on comparable risks is 10 percent, should this firm shut down immediately in the short run? Explain your answer.