Question

A firm suffering economic losses decides whether or not to produce in the short run on the basis of whether A. total revenues cover total variable cost B. total revenues cover total fixed costs C. total revenues cover the sum of total fixed and total variable costs D. firms suffering economic losses will always shut down

Answer 1

A. total revenues cover total variable cost

Step-by-step explanation:

In the case of the shory run, if the price is more or equivalent to the avergae variable cost so the firm would continue to operate

That means

P = AR >= AVC

where,

P = Price

AR = Average revenue

AVC = average variable cost

Therefore as per the given situation, the option A is correct

hence, the same is to be considered