Complete the following:Calculate the firm’s profit or loss. Is the firm making a profit or a loss? Explain the Short Run Shut Down Rule. Should this firm shut down?

Calculate the firm’s profit | Business & Finance homework help

To calculate the firm’s profit or loss, we must subtract its total expenses from its total revenue. If this amount is a positive number, then the firm is making a profit; if it produces a negative figure, on the other hand, then the firm is making a loss. In our case scenario, since there are $8 million in expenses and only $7 million in revenue – then there is currently a net loss of $1 million.

The Short Run Shut Down Rule states that when production costs exceed sales prices—a company should consider temporarily suspending operations until revenues become larger than expenditures again. This helps to ensure organizations don’t waste valuable resources (e.g., labor or materials) when profits can not be earned; rather they focus their attention on activities which will actually generate earnings (like reworking strategy plans).

Given that this particular business has an operating deficit—it may be wise for them to shut down at least temporarily and assess how best to move forward in order to get back into the black sooner than later. Depending on their overall goals—this could involve cutting overhead expenses such as staff salaries or reducing inventory levels so more funds can go towards marketing campaigns aimed at boosting sales figures instead.

Shutting down operations in order to save money might seem counterintuitive but by following the Short Run Shut Down Rule– companies can often emerge stronger after taking necessary steps towards fiscal responsibility