"I'm losing money,but since my fixed costs are so high,I simply cannot afford to shut down." If the firm were attempting to maximize profit,this decision may be:

Question

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If the firm is covering all of its variable costs, it means that each unit sold is contributing something towards covering the fixed costs. In this case, it would be better to continue operating in the short run rather than shutting down and incurring a loss equal to the fixed costs. However, if the price falls below the average variable cost, the firm should shut down as it would be better to incur a loss equal to the fixed costs rather than incurring losses equal to the sum of fixed and variable costs.

"I'm Losing Money,but Since My Fixed Costs Are So High,I