In the short run A. most firms have short run supply curves that are the same as their long run supply curves. B. firms may choose to operate at a loss. C. firms will shut down if operating at a loss. D. profit maximizing firms have identical short run supply curves.

Question

Juliette Wells

Business

4 December, 17:50

In the short run A. most firms have short run supply curves that are the same as their long run supply curves. B. firms may choose to operate at a loss. C. firms will shut down if operating at a loss. D. profit maximizing firms have identical short run supply curves.

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Answers (1)

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Henderson · Answer 1

The correct answer is option B.

Explanation:

In the short run, firms may have a loss if the price is lower than the average total cost. In the short run though firms cannot enter or exit the market. So, if the price level is higher than the average total cost, the firms will keep operating even after incurring a loss.

In the long run though, if the price level is still lower than the average total cost, the firm will no longer operate and will exit the market.