1.At a recent board meeting, the president and the CEO got into a heated argument about whether to shut-down the firm's plant in Dhaka Division. The CEO thinks that the organization's business fits the competitive market definition relatively well. The plant currently incurs losses of Taka 60 million and the Fixed cost is Taka 70 million. The president of the firm argued that the plant should continue to operate, at least until a buyer is found for the production facility. The president's argument was based on the fixed cost. The CEO exploded over this point, blaming the president for considering the fixed costs in making shutdown decision. According to the CEO, "everyone knows fixed costs do not matter!". Should the plant be closed or continue to operate at a loss in the short run? How would you explain to the incorrect party that he or she is wrong?

What would be your opinion if the following situation prevails: The firm is currently earning-short-run profits but the industry is in increasing cost industry although it is experiencing a decline in its product demand. In the long run, what do you expect will happen to: firm's cost of production, the price it can charge and the profits it can make?