Answer to Question #179138 in Microeconomics for Tanisha

Question

Consider the situation of a fitness center, which has signed a contract to rent space that costs $10,000 per month. Costs connected for hiring fitness trainers are $15,000 per month. If the center remains open, it will earn revenues of $10,000 per month. Should the center shut down?

Answer 1

The firm should just close down because they are making losses. Expenses incurred is equals to 25,000 while they generate a revenue of 10,000. This means they are making a loss of $15,000 i.e $25,000-10,000= 15,000$