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QUESTION 3 For the most recent financial reporting period, a business domiciled in the UK has...

QUESTION 3 For the most recent financial reporting period, a business domiciled in the UK has Revenue of £2,000,000 and Total Costs of £2,500,000 (=Total Fixed Costs: £1,000,000; Total Variable Costs: £1,500,000). The Net Loss on the firm’s Income Statement is reported as £500,000 (ignoring Tax Implications). The firm operated in a perfectly competitive market.

Question 3A: What decision should the firm make regarding operations over the short-term? [5 marks]

Question 3B: What decision should the firm make regarding operations over the long-term? [2 marks]

Question 3C: Assume the same business scenario except that Revenue is now £1,300,000, which creates a Net Loss of £1,200,000. What decision should the firm make regarding operations in this case? [3 marks]

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