If the demand curve falls below the ATC curve but lies above AVC, then the firm should

Question

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When the demand curve falls below the ATC (Average Total Cost) but lies above the AVC (Average Variable Cost), it means the firm is covering its variable costs but not its total costs. Therefore, it can continue to operate in the short run to cover its variable costs and some of its fixed costs, but it cannot sustain this in the long run without incurring losses.

If the Demand Curve Falls Below the ATC Curve but Lies