Answer to Question #53084 in Other Economics for Clarabelle
a. Should the Miami plant be closed or continue to operate at a loss in the short run?
b. How would you explain to the incorrect party that he is wrong?
a. It is impossible to say clearly if Miami plant should be closed or should continue to operate at a loss in the short run, because we should compare price (P) and average variable costs (AVC) to consider the necessity of the shutting down. The firm will be closed in the short-run, if P < AVC.
b. We need to explain to the incorrect party that it is incorrect to compare losses and fixed costs of the firm to consider the necessity of closing the firm.
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