Question

some competitive firms are willing to operate in the short run because their revenues are at least able to cover their variable costs. true or false

Answer 1

Firm face loss in short run and still it operates in short run because its average variable costs are covered by the price of the product. Loss will be minimized by producing the output level where marginal revenue equals marginal cost.

In the short run a firm will continue to produce as long as total revenue covers total variable costs or price per unit > or equal to average variable cost (AR = AVC). This is called the short-run shutdown price.

Therefore, the answer is True.