A firm should continue to operate even at a loss in the short run if
A)its output is above the break-even point.
B)its revenues are less than its fixed costs.
C)it can cover its variable costs and some of its fixed costs.
D)it has some fixed costs that cannot be brought down to zero.

Question

Quizplus · Accepted Answer

A firm should continue to operate in the short run if it can cover its variable costs and some of its fixed costs. This is because, in the short run, fixed costs are sunk costs and do not change with the level of output. As long as the firm can cover its variable costs, any additional revenue can contribute to covering fixed costs, reducing losses.

A Firm Should Continue to Operate Even at a Loss