If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run,a perfectly competitive firm will:

Question

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When the price is greater than the average variable cost but less than the average total cost, a perfectly competitive firm will continue to produce in the short run to cover its variable costs and some of its fixed costs, even though it is incurring an economic loss. This is because shutting down would result in a greater loss, equal to the total fixed costs.

If the Price Is Greater Than the Average Variable Cost