At the level of output where marginal revenue equals marginal cost,assume that the price of a competitive firm's product is between the firm's average total cost curve and its average variable cost curve.In this case the firm would

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At the level of output where marginal revenue equals marginal cost, the firm is operating at its profit maximization level in the short run. Since the price is between the firm's average total cost curve and its average variable cost curve, it is covering its variable costs and making some contribution towards its fixed costs. Therefore, it is beneficial for the firm to continue to operate in the short run, rather than shutting down or decreasing output, as long as it is covering its variable costs.

At the Level of Output Where Marginal Revenue Equals Marginal