A profit-maximizing firm continues to operate even though it is losing money.It sells its product at a price of $100.
A)Average total cost is less than $100.
B)Average fixed cost is less than $100.
C)Marginal cost is increasing.
D)Average variable cost is less than $100.
E)Marginal cost is decreasing.

Question

Quizplus · Accepted Answer

If the firm is still operating even though it is losing money, it means that the price of its product ($100) is greater than its average variable cost. This would only be possible if option D is true, that is, the average variable cost is less than $100.

A Profit-Maximizing Firm Continues to Operate Even Though It Is