Question

George and Dan's political consulting firm is losing money, but it is more than covering its variable costs. What is the most accurate statement we can make about it?

Answer 1

Answer:

- It will go out of business in the long run.

Explanation:

If George and Dan's political consulting firm is losing money, but it is more than covering its variable costs, then the most accurate statement we can make about it is that: It will go out of business in the long run.

In the SHORT RUN, as long as the firm is covering variable costs, it means that the firm is able to generate normal profit or contribution that takes care of part or all of its fixed costs. It will stay in business

In the LONG RUN, the firm will only continue to operate if it can make normal profits

Normal profit occurs when the difference between a company's total revenue and combined explicit and implicit costs are equal to zero.

Since George and Dan's political consulting firm cannot cover fixed costs, it will go out business in the long run.