In the short run, as long as SMC = MR = P, if price is greater than average variable cost, the firm should continue to operate.

Question

Quizplus · Accepted Answer

As long as the price is greater than the average variable cost, the firm is earning a profit in the short run and should continue to operate. If the price falls below the average variable cost, the firm may need to shut down as it is not able to cover its variable costs.

In the Short Run, as Long as SMC = MR