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

If a firm can cover its variable costs and some of its fixed costs, then it is contributing towards covering the total fixed costs. Therefore, it may be beneficial for the firm to continue operating even at a loss in the short run. This is because shutting down operations would result in zero revenue, which may not even be enough to cover the variable costs. Additionally, keeping the production line open may help the firm to gain experience, customer loyalty, and may be essential for survival in the long run.

A Firm Should Continue to Operate Even at a Loss