In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and
A) total cost.
B) average variable cost.
C) total fixed cost.
D) the number of buyers.

Question

Quizplus · Accepted Answer

In the short run, a firm must cover its average variable costs (AVC) to continue operating. If the price of the output is at least equal to the AVC, the firm can cover its variable costs and contribute to fixed costs, even if it's not making a profit. Total fixed costs and the number of buyers are less immediately relevant for the short-run decision to operate, as fixed costs are incurred regardless of production level, and the number of buyers affects demand rather than the cost-covering decision.

In Deciding Whether to Operate in the Short Run,the Firm