At a recent board meeting of a perfectly competitive firm, the board considered a staff proposal the
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At a recent board meeting of a perfectly competitive firm, the board considered a staff proposal the firm shut down their plant in Miami until a buyer is found. The Miami plant currently loses $60,000 every month. The president argued that the Miami plant should continue to operate, at least until a buyer was found as the plant had fixed costs of $68,000 per month. Should the firm shut down the plant (temporarily) until a buyer is found or continue to operate it till a buyer is found? Please give an explanation.
(Note: Shut down does not mean that the plant is liquidated, it means that the firm does not, at least temporarily, produce any output in the short run).
Related Book For
Managerial Economics Foundations of Business Analysis and Strategy
ISBN: 978-0078021718
11th edition
Authors: Christopher Thomas, S. Charles Maurice
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