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.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter9: Market Structure And Long-run Equilibrium
Section: Chapter Questions
Problem 1MC
Related questions
Question
- 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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc