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For the most recent financial reporting period, a business domiciled in the UK has Revenue of...

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 A: What decision should the firm make regarding operations over the short-term?

Question B: What decision should the firm make regarding operations over the long-term?

Question 3: 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?

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