Reference no: EM132413253

Suppose you are the economic advisor of Jackie Brown Company, a perfectly competitive company that is suffering economic losses due to unforeseen continuous drop in the market price. Jackie Brown is a price taker, hence it cannot influence the market price, nor could it change production technology in the short run. You are asked to decide whether the company should shut down its operations or to continue to operate at a loss. Jackie Brown is selling 50 units of output per day, at a price of $20 per unit. The cost of raw material, direct labor, energy, and other variable inputs is about $24000 monthly. Unfortunately, an estimate of Jackie Brown fixed costs is currently unavailable.

So, what is your decision? Justify your answer.