In the short run, a profit-maximizing firm should operate even when it is losing money, so long as the market – is above – . In this situation, continued operation enables a firm to cover all of its – and some of its – with any remaining revenue.
Added by Timothy W.
Step 1
This is because variable costs are the costs that vary with the level of output, such as raw materials and labor. As long as the market price is above these variable costs, the firm can still cover some of its costs. Show more…
Show all steps
Your feedback will help us improve your experience
James Kiss and 70 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
In the short run, a monopolistically competitive firm Group of answer choices will always make an economic profit. will break even. will make an economic loss. could make an economic profit, an economic loss, or break even.
James K.
"If the price for firm's output is greater than the minimum value of its average variable cost; but less than the minimum value of its average total cost; then the firm should shut down in the short run; but resume producing in the long run. the firm should continue producing in the short run; but exit the market in the long run. the firm is earning positive economic profit. the firm should shut down in the short run and exit the market in the long run: the firm should continue producing in both the short run and the long run:"
Azat N.
If a firm shuts down in the short run, then Group of answer choices its economic profits are zero. its losses are equal to its fixed costs. its operating profits are positive. it must be the case that its revenues from operating were less than its total costs.
Crystal W.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD