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The president and CEO of a company got into an argument recently about whether to shut down the firm's operations in Atlanta. The Atlanta site loses $60,000 monthly. The president of the firm argued that the site should continue to operate until a buyer is found for the facility because fixed costs for the facility are $68,000 monthly. The CEO responded that fixed costs do not matter in the shutdown decision and operations at the Atlanta facility should stop immediately. Who is correct? How would you describe to the incorrect party why he or she is wrong?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M961950

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