Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should:
A)not change its level of output even if it's earning an economic loss in the short run.
B)shut down.
C)produce more so that its total revenue increases.
D)purchase more fixed factors of production.

Question

Quizplus · Accepted Answer

The firm must pay fixed costs whether it operates or not. As long as the firm is covering its variable cost, it should produce a positive level of output. Otherwise, it should shut down.

Suppose That When a Firm Produces the Level of Output