Assume that at the current level of output,price equals marginal revenue,but is less than average total cost.So long as price is greater than average variable cost,the firm should continue to operate in the short run to minimize its losses.

Question

Quizplus · Accepted Answer

This is a correct statement based on the short run profit maximization rule. A firm should continue to operate as long as the price is covering its variable costs, and it is better to minimize losses than to shut down completely. However, if the price falls below the average variable cost, it would be better for the firm to shut down rather than continuing to operate and incurring further losses.

Assume That at the Current Level of Output,price Equals Marginal