Under perfect competition, when will a firm continue to operate in the short term?

Show Answers

When the market price is equal to or greater than the average variable costWhen the price covers only the variable costsWhen the price covers the average fixed costsWhen the price is sufficient to cover fixed expenses

Explanation

In the short run, a perfectly competitive firm will keep producing as long as the price at least covers the average variable cost. If the price falls below this level, the firm would minimize losses by shutting down. Covering fixed costs is not necessary in the short run since they are sunk costs.