If a profit-maximizing, competitive firm is producing at a loss in the short run, then A)P

Question

If a profit-maximizing, competitive firm is producing at a loss in the short run, then
A)P < AVC.
B)P < MC.
C)P = AVC + AFC.
D)average revenue is less than price.
E)P < ATC, but P > AVC.

Quizplus · Accepted Answer

In the short run, if a profit-maximizing, competitive firm is producing at a loss, it means that the price (P) it receives for its product is less than its average total cost (ATC) but greater than its average variable cost (AVC). This situation allows the firm to cover its variable costs and contribute to fixed costs, minimizing losses by continuing to produce rather than shutting down.

If a Profit-Maximizing, Competitive Firm Is Producing at a Loss