When a firm minimizes its losses in the short run,
A)It continues to produce only if price exceeds average variable cost.
B)The firm makes an investment decision.
C)The firm enters or exits from the market.
D)It continues to produce only if price exceeds marginal revenue.

Question

Quizplus · Accepted Answer

When a firm minimizes its losses in the short run, it will continue to produce as long as the price exceeds the average variable cost. This is because the firm can then cover its variable costs and contribute towards covering its fixed costs. If the price falls below the average variable cost, the firm should shut down in the short run to minimize its losses.

When a Firm Minimizes Its Losses in the Short Run