The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $145,000. Because of this information, in the short run, Davis Golf Course should: a) shut-down. b) exit the industry. c) stay open because shutting down would be more expensive. d) stay open because the firm is making an economic profit.

Question

Silas Lyons

Business

30 September, 11:13

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $145,000. Because of this information, in the short run, Davis Golf Course should: a) shut-down. b) exit the industry. c) stay open because shutting down would be more expensive. d) stay open because the firm is making an economic profit.

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Answers (2)

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Samuel Henderson · Answer 1

Answer: In the short run, Davis Golf Course should stay open because shutting down would be more expensive. Because his revenue his more than his variable cost he should stay open because this way his loss would be (130,000+75,000) - 145,000 = $60,000 but if he shuts down the business in the sort run his loss would be 75,000. In the long run he should shut down the business.

Paulina Booker · Answer 2

C. Stay open because shutting down would be more expensive

Explanation:

At the revenue is $145,000, David Golf Course suffers the loss is $60,000 ($145,000 - $75,000 - $130,000). But if in the short run, they shut-down or exist the industry, they will bare the fixed cost $75,000.