7. A fi rm is experiencing a loss of $5,000 per year.

The fi rm has fi xed costs of $8,000 per year.

a. Should the fi rm operate in the short run or shut down?

b. If the situation persists into the long run, should the fi rm stay in the industry or go out of business?

c. Now suppose that the fi rm’s fi xed costs are

$2,000. How would this change its short-run and long-run decisions?