In the short run, when a monopolist incurs a loss, it will
A) always shut down.
B) always produce where marginal cost equals marginal revenue.
C) produce as long as total revenue is sufficient to cover variable costs.
D) produce as long as total revenue is sufficient to cover fixed costs.

Question

Quizplus · Accepted Answer

In the short run, a monopolist, like other firms, will continue to produce as long as the total revenue covers the variable costs, even if it's incurring losses. This is because, in the short run, fixed costs are sunk and unavoidable, so the firm aims to cover at least its variable costs to minimize losses.

In the Short Run, When a Monopolist Incurs a Loss