If a firm is maximizing profits in the short run at a level of output where
Average total cost Price Average variable cost,then the firm is ________.

Question

If a firm is maximizing profits in the short run at a level of output where
Average total cost > Price > Average variable cost,then the firm is ________.

Quizplus · Accepted Answer

In this scenario, the firm's price is above its average variable cost but below its average total cost. This means the firm is covering its variable costs and contributing to covering some of its fixed costs, but it's not covering all of its costs, leading to losses. However, by continuing to produce, it minimizes its losses compared to if it were to shut down, where it would still have to cover its fixed costs without generating any revenue.

If a Firm Is Maximizing Profits in the Short Run