A firm earning economic losses should operate in the short run as long as

Question

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In the short run, a firm should operate as long as it can cover its variable costs. If the price per unit sold is greater than the average variable cost per unit produced, it means that the firm is covering its variable costs and contributing towards a portion of the fixed costs. If the firm shuts down, it would still have to cover its fixed costs and the losses would increase. Therefore, operating in the short run is preferable to shutting down.

A Firm Earning Economic Losses Should Operate in the Short