Question

Sizzles, a restaurant chain, have been closing their stores across Australia. They have also been making accounting losses.

1. This suggests Sizzles would have been experiencing economic losses.
2. Sizzles stores would have been able to pay all the explicit costs from sales revenues.
3. From an economics perspective, closing a store would indicate the variable costs of operations were not able to be paid from sales revenues.
   Sizzles, a restaurant chain, have been closing their stores across Australia. They have also been making accounting losses 1. This suggests Sizzles would have been experiencing economic losses. 2. Sizzles stores would have been able to pay all the explicit costs from sales revenues. 3. From an economics perspective, closing a store would indicate the variable costs of operations were not able to be paid from sales revenues. Which of the above statements are true? Only 1 is true. Only 2 is true. Both 1 and 2 are true. Both 2 and 3 are true. Both 1 and 3 are true. All three are true.
   

Answer 1

Both 1 and 3 are true.

Accounting Loss means Explicit costs are greater than Total sales revenue of firm.

So, 2 is incorrect as firm is not able to pay all explicit costs if it occurs losses.

Firm shut down its production when firm is not able to cover all its variable cost. So, statement 3 is correct.