In the short run,if a firm's total variable cost curve lies everywhere above its total revenue curve,the firm should produce
A)the output level that minimizes average total cost
B)the output level that minimizes average variable cost
C)the output level that minimizes the distance between marginal cost and marginal revenue
D)the output level that maximizes the distance between marginal cost and marginal revenue
E)no output

Question

Quizplus · Accepted Answer

If a firm's total variable cost curve lies everywhere above its total revenue curve, it means that the firm is making a loss on every unit of output it produces. Therefore, in the short run, it is best for the firm to stop production altogether and incur only its fixed costs. This is because the firm's variable costs are not being covered by its revenue, and continuing to produce would only lead to further losses. Thus, the best choice in this scenario is to shut down and produce no output.

In the Short Run,if a Firm's Total Variable Cost Curve