A firm with total revenue of $500, total cost of $700, and variable cost of $400 should continue to operate its production facility.

Question

Quizplus · Accepted Answer

The firm should continue to operate if its total revenue covers its variable costs, even if it's not covering total costs, because it can contribute to covering some of its fixed costs and minimize losses. Here, with total revenue of $500 and variable costs of $400, the firm is covering its variable costs and contributing $100 towards fixed costs.

A Firm with Total Revenue of $500, Total Cost of $700