A purely competitive firm will be willing to produce even at a loss in the short run, as long as
A) the loss is smaller than its total variable costs.
B) the loss is smaller than its marginal costs.
C) the loss is smaller than its total fixed costs.
D) price exceeds marginal costs.

Question

Quizplus · Accepted Answer

In the short run, a firm will continue to produce if it can cover its variable costs, even if it incurs a loss, as long as the loss is smaller than its total fixed costs. This is because fixed costs must be paid regardless of production, so minimizing losses by covering variable costs is preferable.

A Purely Competitive Firm Will Be Willing to Produce Even