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We learned when a firm should shut-down. The rule of thumb is shut down if tr < tc.
What is shut-down?
Shut-down is the process of closing a business or organization permanently. It involves ceasing operations, selling off or liquidating assets, settling accounts with creditors, and/or terminating employees. Shut-downs can occur due to financial reasons, market conditions, a change in ownership, or other reasons. A shut-down can have serious consequences for the employees, customers, and suppliers of the business, as well as the local economy. Depending on the size of the business and its impact on the local economy, a shut-down may also receive attention from government and regulatory bodies.
The rule of thumb when it comes to deciding whether or not a firm should shut down is to shut down if total revenue (TR) is less than total costs (TC). This means that if the total revenue that the firm is generating is not enough to cover all of its costs, the firm should shut down.
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