Microeconomics: Principles & Policy
14th Edition
ISBN: 9781337794992
Author: William J. Baumol, Alan S. Blinder, John L. Solow
Publisher: Cengage Learning
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Question
Chapter 10, Problem 3TY
To determine
To Check:The reason for not to close the business when the firm earns zero economic profit.
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Why would a firm that is making loss in the short-run choose to operate rather than shut down?
Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down? Think of recent examples.
Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?
Chapter 10 Solutions
Microeconomics: Principles & Policy
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Similar questions
- Many firms, especially in perfectly competitive markets, file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?arrow_forwardCan you explain to me why in the short run, firms only use variable cost to determine whether or not to shut down.arrow_forwardDecide whether a firm making short-run losses should continue to operate or shut down its operations.arrow_forward
- In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?arrow_forwardSmall “Mom and Pop firms,” like inner city grocery stores, sometimes exist even though they do not earn economic profits. How can you explain this?arrow_forwardDiscuss where does the shutdown being and why? What does the company has to do to get back to supernormal profit?arrow_forward
- Why should a firm shut down if its average variable cost curve is above the price of their product?arrow_forwardConsider the concepts of accounting profit and economic profit. Suppose you are a consultant and you are meeting with a business owner who is trying to decide whether to keep that business open or open a business in a different industry. Discuss the differences between accounting profit and economic profit and why it should matters in this circumstance.arrow_forwardConsider the following information about a business Rodriguez opened last year: price = $5; quantity sold = 15,233; implicit cost = $18,000; explicit cost = $33,000. What was Rodriguez's accounting profit and economic profit? Show your work.arrow_forward
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