A monopolistically competitive firm that is incurring a loss will produce in the short run as long as the revenue the firm receives is sufficient to cover

Question

Quizplus · Accepted Answer

In the short run, a monopolistically competitive firm will continue to produce as long as it can cover its variable costs, even if it is incurring a loss. This is because, by covering variable costs, the firm can contribute to fixed costs and minimize losses. Fixed costs are sunk in the short run, so the firm focuses on covering variable costs.

A Monopolistically Competitive Firm That Is Incurring a Loss Will