A. shut down decision is a decision made in the short run and an exit decision is a decision made in the long run is true.
When a business is shut down, it ceases to produce goods or services but keeps the capital necessary to resume production in the future. When the money generated from the sale of the goods or services produced cannot even cover the variable expenses of production, a company will decide to put a stop to production.
In that case, producing will result in a greater loss for the company than not producing at all. When an owner decides to no longer be involved with a business, this is known as an exit.
The owner's ownership interest in the company is typically sold together with such an exit, but this is not a requirement. For instance, a business owner might employ a management group to run the enterprise while still retain his equity.
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