QUESTION 3
For the most recent financial reporting period, a business domiciled in the UK has Revenue of £2,000,000 and Total Costs of £2,500,000 (=Total Fixed Costs: £1,000,000; Total Variable Costs: £1,500,000). The Net Loss on the firm’s Income Statement is reported as €500,000 (ignoring Tax Implications). The firm operated in a perfectly competitive market.
Question 3A: What decision should the firm make regarding operations over the short-term? (5 marks]
Question 38: What decision should the firm make regarding operations over the long-term? (2 marks)
Question 3C: Assume the same business scenario except that Revenue is now €1,300,000, which creates a Net Loss of £1,200,000. What decision should the firm make regarding operations in this case? (3 marks)
QUESTION 4
In your critical evaluation do you think that the perfect competition exist in the real world? Justify your answer by employing references from official sources. (15 marks]
Sample Solution
