When total revenue is less than total variable cost, a firm in a competitive market will:

Question

Quizplus · Accepted Answer

In the short run, a firm may continue to operate even if total revenue is less than total variable cost as long as it can cover its variable costs and some of its fixed costs. However, if total revenue is less than total variable cost and the firm cannot even cover its variable costs, it is better for the firm to shut down in the short run to minimize losses. Therefore, option A is the best choice.

When Total Revenue Is Less Than Total Variable Cost, a Firm