In the short run, firms may choose to operate at a loss if they can cover their variable costs, with the expectation that conditions will improve and eventually allow them to cover their total costs and earn a profit. This decision is based on the hope that future revenues will be sufficient to cover both variable and fixed costs.

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In the Short Run

Question 8

Multiple Choice

In the short run

A) firms will shut down if operating at a loss.
B) profit maximizing firms have identical short run supply curves.
C) firms may choose to operate at a loss.
D) most firms have short run supply curves that are the same as their long run supply curves.

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