Two firms in a local shopping center are losing money. Firm A has high fixed costs and relatively low variable costs. Firm B has low fixed costs and relatively high variable costs. Would you expect firm A to continue operating in the short run, despite losing money? Explain your answer. Would you expect firm B to continue operating in the short run, despite losing money? Explain your answer. Would you expect either firm to continue operating in the long run, despite losing money? Explain why a firm that is losing money would exit the market in the long run, despite continuing to operate in the short run.
Two firms in a local shopping center are losing money. Firm A has high fixed costs and relatively low variable costs. Firm B has low fixed costs and relatively high variable costs. Would you expect firm A to continue operating in the short run, despite losing money? Explain your answer. Would you expect firm B to continue operating in the short run, despite losing money? Explain your answer. Would you expect either firm to continue operating in the long run, despite losing money? Explain why a firm that is losing money would exit the market in the long run, despite continuing to operate in the short run.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Two firms in a local shopping center are losing money. Firm A has high fixed costs and relatively low variable costs. Firm B has low fixed costs and relatively high variable costs.
- Would you expect firm A to continue operating in the short run, despite losing money? Explain your answer.
- Would you expect firm B to continue operating in the short run, despite losing money? Explain your answer.
- Would you expect either firm to continue operating in the long run, despite losing money? Explain why a firm that is losing money would exit the market in the long run, despite continuing to operate in the short run.
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