When a firm minimizes its losses in the short run,
A)It continues to produce only if price exceeds average variable cost.
B)The firm makes an investment decision.
C)The firm enters or exits from the market.

Question

Quizplus · Accepted Answer

If a firm is minimizing its losses in the short run, it means that it is still operating despite incurring losses. The firm will continue to produce as long as it can cover its variable costs, which means that price must exceed average variable cost. This is because the firm can still contribute to covering its fixed costs even if it is not making a profit. The other options, making an investment decision and entering or exiting from the market, are long-run decisions that do not necessarily affect the firm's short-run losses.

When a Firm Minimizes Its Losses in the Short Run