Respuesta :
To maximize your financial well-being, you should continue operating in the short run because the shutdown rule says that if the price of sales exceeds the variable costs, then the firm should operate in the short run and here in this data given the price of sales is more than the raw material costs that is $2,000 is more than $1,000.
Typically, to minimize losses, a company needs to have revenue R≥TC, total costs. All fixed costs, however, are sunk costs in the short term. After deducting fixed expenses, a business must achieve R≥VC (total revenue that equals or exceeds variable expenses) to remain in business. As a result, a business will find it profitable to operate in the short term if the market price (p) is greater than or equal to the average variable cost (AVC).
The shutdown rule, as it is commonly known, states that a company "should continue to function in the short run if pricing matches or exceeds average variable expenses." Simply put, the rule states that a company must generate enough income to cover its variable costs to produce in the short run.
To learn more about Shutdown Rule visit here:
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