Which of the following statements is correct regarding a firm's decision-making?
A)The decision to shut down and the decision to exit are both short-run decisions.
B)The decision to shut down and the decision to exit are both long-run decisions.
C)The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision.
D)The decision to exit is a short-run decision, whereas the decision to shut down is a long-run decision.

Question

Quizplus · Accepted Answer

The decision to shut down is a short-run decision because it involves temporarily stopping production due to a decline in demand or increase in costs. On the other hand, the decision to exit is a long-run decision because it involves permanently leaving the market due to factors such as a lack of profitability or a shift in business strategy.

Which of the Following Statements Is Correct Regarding a Firm's