A popular resort restaurant will not maximize profits if it chooses to stay open during the less-crowded “off season” when its total revenues exceed its variable costs. The decision to remain open depends on the level of losses and whether the firm can cover its variable costs. If the firm's revenue is high enough to offset the increased variable costs and the losses diminish when it remains open, then it should continue operating in the short run.
When a popular resort restaurant chooses to stay open during the less-crowded “off season” when its total revenues exceed its variable costs, it will not maximize profits.
This decision depends on the level of losses and whether the firm can cover its variable costs. If the firm's revenue is high enough to offset the increased variable costs and the losses diminish when it remains open, then it should continue operating in the short run.
However, if the firm's losses are greater because it does not make enough revenue to offset the increased variable costs, it should shut down immediately and only incur its fixed costs.