If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then in the short run:
A) it should produce where MR = MC.
B) it should produce zero output.
C) it should go out of business.
D) total revenue is less than total variable costs.
E) total revenue is greater than total costs.

Question

Quizplus · Accepted Answer

If price is greater than average variable cost, the firm is still covering some of its variable costs and should continue to produce as long as it can cover its variable costs in the short run. Producing where MR = MC will minimize the firm's losses.

If a Firm Is Operating at a Loss in the Short