A firm that is operating at a loss may continue to operate for a while because of costs that it will still have to pay even if production ceases.

Question

Quizplus · Accepted Answer

This is because a firm may have fixed costs that it must continue to pay, such as rent or loan repayments, even if it stops producing goods or services. Therefore, it may still choose to operate in the short run even if it is incurring losses.

A Firm That Is Operating at a Loss May Continue