Final answer:
A monopolist will continue to operate in the short run if the price is above average variable cost to cover variable costs and contribute to fixed costs.
Step-by-step explanation:
A monopolist will operate in the short run if the price is above average variable cost (AVC). If the price that the monopolist can charge falls below AVC, the firm would not be able to cover even its variable costs; hence, it would be more rational to shut down and produce no output to minimize losses.
In contrast, when the price is above AVC, the firm can cover its variable costs, and by producing the level of output where marginal revenue (MR) equals marginal cost (MC), the firm can contribute to covering its fixed costs and possibly earn a profit.
This is because in the short run, a monopolist can set the price and determine the quantity it wants to produce. If the price charged is above the average variable cost, the firm can cover its variable costs and potentially earn a profit. However, if the price falls below the average variable cost, the firm will not be able to cover its variable costs and may choose to shut down.