Author Question: Evaluate the following statement. If a firm is suffering economic losses then the sensible thing to ... (Read 13 times)

eruditmonkey@yahoo.com · **on:** Jun 29, 2018

Evaluate the following statement. If a firm is suffering economic losses then the sensible thing to do is to shut down temporarily.

What will be an ideal response?

Question 2

Using Scenario 1 what would happen to your budget constraint if you came up with a study technique that allowed you to earn 3 points for every hour spent studying economics and still only 2 points for every hour spent studying French? What has

happened to the relative price of one hour of studying French?

taylorsonier · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Not necessarily. A firm should only shut down if it is not earning an operating profit. If a firm is receiving less total revenue than its total variable cost then this advice would make sense.

Answer to Question 2

The budget constraint would pivot out. The relative price of studying French would actually rise since every hour you spend studying French is costing your 3 points towards your economics grade rather than the previous 2 points.