Final answer:
The last party to receive payment if a firm closes would be the equity holders. Parties are paid according to the priority of claims, where owners are paid last after all creditors and bondholders have been satisfied.
Step-by-step explanation:
The last party to receive payment if a firm were to close, typically, would be the firm's equity holders, such as shareholders in a corporation. The order in which parties are paid during the liquidation process is known as the priority of claims, with secured creditors being paid first, followed by unsecured creditors, and possibly bondholders, before any distribution is made to the owners or shareholders of the firm. This protocol for distributing assets follows what is known as absolute priority.
The reasoning for the firm's decision to shut down often relates to reducing losses. A shutdown point is reached when a firm's revenue cannot cover the variable costs of production, and it makes no economic sense to continue operating in the short run even though fixed costs still have to be paid. In the long run, if the firm anticipates ongoing losses, it may opt to close permanently, ceasing all expenses.