Your company sells Beyonce concert DVDs. Total fixed costs for your operation are $10,000 a year. The variable costs are: 50Q – Q2 (Q is in hundreds) The firm pays $500 a year in various taxes. The market price of these DVDs is $40. Beyonce has many fans. Show your work/thought process:
a. Should the firm shut down in the short run? Explain.
b. If the firm’s fixed costs decreased from $10,000 to $8,000, would the firm shut down in the short run?