A firm experiencing economic losses will still continue to produce output in the short run as long as
A)Revenues are greater than total fixed cost.
B)MR = MC.
C)Price is above average variable cost.

Question

Quizplus · Accepted Answer

In the short run, a firm will continue to produce as long as price is above average variable cost, even if the firm is experiencing economic losses. This is because the firm can still cover its variable costs and some portion of its fixed costs. However, if the price falls below average variable cost, the firm should shut down production and minimize its losses. MR = MC is a profit-maximizing condition but it does not guarantee that the firm is covering all its costs. Revenues being greater than total fixed cost is not a sufficient condition for continuing production as it does not take into account variable costs.

A Firm Experiencing Economic Losses Will Still Continue to Produce