Figure 8.4.3
-Refer to Figure 8.4.3 above. When the firm produces the loss-minimizing level of output, it can recover:
A) all of the variable cost and part of the fixed cost.
B) all of the fixed cost and part of the variable cost.
C) neither the fixed nor the variable cost in their totality.
D) all of the variable cost, but none of the fixed cost.

Question

Figure 8.4.3
-Refer to Figure 8.4.3 above. When the firm produces the loss-minimizing level of output, it can recover:
A) all of the variable cost and part of the fixed cost. 
B) all of the fixed cost and part of the variable cost. 
C) neither the fixed nor the variable cost in their totality. 
D) all of the variable cost, but none of the fixed cost.

Quizplus · Accepted Answer

When a firm produces the loss-minimizing level of output, it typically does so by covering all of its variable costs and possibly part of its fixed costs. The price at this level is at least equal to the average variable cost, allowing the firm to cover these variable costs with its revenue. Fixed costs, however, are sunk in the short run and may not be fully covered if the price does not exceed the average total cost.

Figure 8.4.3 -Refer to Figure 8.4.3 Above. When the Firm Produces the Produces