When a firm has an accounting profit that is negative, it

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A negative accounting profit means that the total cost of the firm's production exceeds the total revenue generated by selling that production. This does not necessarily mean that the firm has negative economic profit, which takes into account opportunity costs and the implicit costs of production. However, a firm with negative accounting profit may still continue to produce in the short run if its revenue is greater than its variable costs, and it may try to improve its situation by reducing costs or increasing prices. The firm cannot be producing where price equals marginal cost because that would imply at least breakeven accounting profit.

When a Firm Has an Accounting Profit That Is Negative