Most students tend to find it easy to understand why a business will cease production below the shutdown point and make a profit above the break-even point. But they usually find it difficult to explain why a business will continue production in the short run between these points. Here is a quick activity that may help explain why.....hopefully using an example that you can relate to.
Should you rent out an apartment that you have the lease on while they are away for a month. ou need to look at the fixed cost (lease payment) and variable cost (electricity). From there, it is only a very short step to explaining how the same principles work for a business!
Short term shut down position
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