At a recent board meeting of a perfectly competitive firm, the board considered a staff proposal the firm shut down their plant in Miami until a buyer is found. The Miami plant currently loses $60,000 every month. The president argued that the Miami plant should continue to operate, at least until a buyer was found as the plant had fixed costs of $68,000 per month. Should the firm shut down the plant (temporarily) until a buyer is found or continue to operate it till a buyer is found? Please give an explanation.

(Note: Shut down does not mean that the plant is liquidated, it means that the firm does not, at least temporarily, produce any output in the short run).

Answer rating: 100% (QA)

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