If the market price falls below a perfectly competitive firm's short-run average total cost but remains above its average variable cost, the firm minimizes its losses by shutting down operations immediately.
Answer: Answer
Answer
False. A perfectly competitive firm will continue operating in the short run to minimize losses as long as price covers average variable cost (), even if price is below average total cost ().
The statement is false because a firm minimizes losses by continuing production whenever market price covers average variable cost (). Because total fixed costs must be paid even at zero output, any excess revenue above variable costs reduces the overall loss compared to producing nothing.
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Key Concept
Short-Run Loss Minimization and Shutdown Rule in Perfect Competition