In the short run, a firm that is operating at a loss has two options.These options are
A)to reduce output or reduce its variable costs.
B)to go out of business or declare bankruptcy.
C)to shut down temporarily or continue to produce.
D)to adopt new technology or change the size of its physical plant.

Question

Quizplus · Accepted Answer

If a firm is operating at a loss in the short run, it can choose to shut down temporarily rather than continue to produce at a loss. By shutting down temporarily, the firm can avoid incurring further variable costs and reduce its losses. However, if the firm expects the losses to continue in the long run, it may need to consider other options such as reducing its fixed costs or exploring new markets to increase revenue. But in the short run, shutting down temporarily is the better option.

In the Short Run, a Firm That Is Operating at a Loss