Answer:
Short-run decision = Do not shut down.
Long-run decision = Exit.
Explanation:
Generally, when the average variable cost is greater than the unit selling price, the firm will shut down in the short-run.
Variable cost = Total cost - fixed cost
Variable cost = $280 - $30
Variable cost = $250
Average variable cost = $250/10 = $25
Selling price = $27
Therefore, selling price > average variable cost, the firm will not shut down in the short-run.
Again, when the average total cost is greater than the unit selling price, the firm will exit in the long-run.
Total cost = $280
Average total cost = $280/10 = $28
Selling price = $27
Since, Average total cost > selling price, the firm will exit in the long-run.
