In the short run a firm should recover variable costs and some portion of overhead rather than undergo a significant decline in business,unless such additional business would affect the pricing of current or future orders.

Question

Quizplus · Accepted Answer

Recovering variable costs and some portion of overhead can help a firm survive in the short run even if they do not make a profit, as they avoid significant losses and potential bankruptcy. However, if additional business would affect pricing, it may be more profitable for the firm to decline orders and focus on long-term sustainability.

In the Short Run a Firm Should Recover Variable Costs