Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their fixed costs.

Question

Quizplus · Accepted Answer

Competitive firms may be willing to operate at a loss in the short run as long as their revenues can cover their variable costs, not necessarily their fixed costs. Operating at a loss but covering variable costs allows them to contribute to fixed costs.

Some Competitive Firms Are Willing to Operate at a Loss