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.

The short run is a period of time in which the quantity of at least one input is fixed and the…

Answered: Two firms in a local shopping center…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

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.
1. Would you expect firm A to continue operating in the short run, despite losing money? Explain your answer.
2. Would you expect firm B to continue operating in the short run, despite losing money? Explain your answer.
3. 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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