Final Answer:
The situations in which it would want to stay open for business in the short run are 2) Yes, the firm will operate if revenue is greater than variable costs.
Step-by-step explanation:
In the short run, (2) a firm with no fixed costs may still find it economically viable to stay open if its revenue covers at least its variable costs. Variable costs are expenses that change in direct proportion to the level of production or output. These costs include raw materials, labor, and other inputs that vary with the quantity of goods or services produced. If the firm's revenue exceeds its variable costs, it means that each unit sold contributes towards covering some portion of the total costs. Even though the firm is currently losing money overall, continuing operations in the short run can help minimize losses by at least contributing to covering variable costs.
For example, if the firm's revenue (R) is greater than its variable costs (VC), the formula for profit (π) is given by π = R - VC. Even if the firm is not profitable overall, as long as R is greater than VC, it can offset some of its variable costs and reduce the extent of its losses. This scenario makes it rational for the firm to stay open in the short run, as it allows for the recovery of a portion of the costs, contributing to financial sustainability until a more favorable market condition or operational adjustment occurs.
However, if the firm's revenue falls below its variable costs, it would incur additional losses by continuing operations. In such cases, it might be more economically sensible for the firm to shut down temporarily or reevaluate its business strategies to improve cost efficiency and overall profitability in the long run.