A local coffee shop has fixed costs of $15,000 per month. Last month, they made $10,000 in revenue. Which of the following best categorizes their decision-making scenario regarding whether to operate or shut down for the next month?

In this scenario, the coffee shop has fixed costs of $15,000 each month, which means they need to cover that amount regardless of how much coffee they sell. Last month, they only made $10,000 in revenue, which is $5,000 less than their fixed costs. This situation means they are operating at a loss since their income does not cover their costs. When deciding whether to continue operating or shut down for the next month, they need to consider whether they can still cover some of their fixed costs, or if it’s better to stop operating temporarily. For example, if the shop believes it can attract more customers next month or reduce some costs, it might choose to stay open; otherwise, shutting down could minimize their losses.