If a perfectly competitive firm is faced with average revenue below average variable cost it will shut down so as to reduce its

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When a firm's average revenue is below its average variable cost, it cannot cover its variable costs, and it will shut down to avoid incurring further losses. By shutting down, the firm reduces its losses to the amount of its fixed costs, as it no longer incurs variable costs.

If a Perfectly Competitive Firm Is Faced with Average Revenue