Suppose a profit-maximising firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs.In the short run it should:

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In the short run, a firm should continue to produce as long as revenue is sufficient to pay for variable costs. This is because the fixed costs are sunk costs that cannot be recovered in the short run, so it's better to keep producing and covering variable costs. Shutting down and incurring the total loss of its fixed cost (option A) would result in a bigger loss. Continuing to produce as long as marginal cost is less than average revenue (option B) could lead to losses if revenue is not enough to cover fixed costs. Lowering the price to gain more market share (option D) may not necessarily solve the problem of revenue shortfall and could even exacerbate the situation by reducing profitability.

Suppose a Profit-Maximising Firm in a Competitive Market Is Unable