Calvin's Campgrounds is a firm conducting business in a competitive market.Calvin realizes he is making a loss and is trying to decide whether to shut down or stay open.He should stay open
A) regardless of the price being charged.
B) if the price being charged is less than his minimum average variable cost (AVC).
C) if his revenues do not cover his variable costs.
D) if his revenues cover his variable costs.
E) as long as he is making revenue.

Question

Quizplus · Accepted Answer

Calvin should stay open if his revenues cover his variable costs, even if he's not covering his total costs. This is because, in the short run, if the price covers the average variable cost, the firm can cover its variable costs and contribute something towards its fixed costs, reducing losses compared to shutting down immediately.

Calvin's Campgrounds Is a Firm Conducting Business in a Competitive