In the short run,if a firm's total variable cost curve lies above its total revenue curve at all possible output levels,the firm's minimum short-run loss
A)equals its total fixed cost
B)equals zero
C)occurs at the maximum point of the total revenue curve
D)occurs at the maximum point of its marginal revenue curve
E)occurs at the minimum point of its marginal cost curve

Question

Quizplus · Accepted Answer

When the total variable cost curve lies above the total revenue curve at all possible output levels, the firm is experiencing losses. However, in the short run, the firm cannot exit the market or change its fixed costs. Therefore, the firm's minimum short-run loss would occur when it produces output such that its total revenue is equal to its variable cost. At this point, the firm would be able to cover all of its variable costs but would not have any profit left over to cover its fixed costs. Thus, the minimum short-run loss would be equal to the firm's total fixed cost.

In the Short Run,if a Firm's Total Variable Cost Curve