Answer to Question #184722 in Economics of Enterprise for Crush

Question

In the Rule of Thumb, Profit Maximization and Loss Minimization (MR = MC), when AVC < P <AC means the firm is incurring losses. What would be his decision?

Answer 1

The business is losing income, but since the overall variable cost is less than the profit, it will continue to operate in the short term rather than shut down.