Say you are the manager of a perfectly competitive firm selling a product. Your
ID: 1185513 • Letter: S
Question
Say you are the manager of a perfectly competitive firm selling a product. Your business is making a loss because total revenue is less than total costs. What would you do--shut down or continue to operate? Use hypothetical numbers to explain. Information you need to provide include--state the product you are selling, the price of the product, the quantity of the product you produce, fixed costs, total cost, figure out total revenue, total and average variable costs. Then go ahead and make your decision. Explain carefully why it makes better sense to shut down rather than continue to operate or to continue to operate rather than shut down, as the case may be. How do fixed costs play a role in your analysis? What is the difference between shutting down and going out of business?Explanation / Answer
Firstly i will go to find out there reason why the business is in loss. What are the reason for business to be in loss. Then will go to find out what can we do to come out of loss business in to profit. if its not possible to bring the business back to profit then there might be two option either to shut down or to find company who will take over my loss business.
Diffrence between shuting down and going out of business is to shut down that perticular unit which is in loss and going out business is to completly sell of the business or closed off the business.