why might a firm continue to produce in the short run even though the market price is less than its average total cost?

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04-11-2022
Business

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why might a firm continue to produce in the short run even though the market price is less than its average total cost?

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shomerajeshwari90 shomerajeshwari90 · Answer 1 · 2022-11-09T00:12:46-05:00

The company will continue to function in the short run, manufacturing the quantity where MR=MC reduce its losses if price goes down below average total cost but continues above average variable cost.

According to the concept of the short run, some inputs would be constant while others will be variable within a particular period of time in the future. It expresses the belief that an economy reacts to certain stimuli differently based on the amount of period it has to do so. The term "short run" doesn't really relate to a precise amount of time but instead to the business, industry, or economic component under study.

The company will continue to function in the short run, manufacturing the volume where marginal revenue equals marginal cost in order to reduce its losses if price goes down below average total cost but remains above average variable cost. If the price goes down below the average variable cost, the business will temporarily shut down operations, bringing down production to zero.

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