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When price is sufficient to cover average variable costs, firms suffering short-run losses will continue to operate rather than shut down.
Average Variable Costs
The total variable costs divided by the number of units produced, indicating the average cost of producing each unit excluding fixed costs.
Short-Run Losses
Financial deficits that a firm experiences in the period where at least one factor of production is fixed, leading to an inability to cover total costs.
Operate
The act of functioning or running a business or machine, carrying out actions necessary for performance.
- Master the concept of average and marginal costs as determinants of production capacity and profitability.
- Use the theories of average variable cost, average total cost, and marginal cost as a basis for decision-making activities.
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Learning Objectives
- Master the concept of average and marginal costs as determinants of production capacity and profitability.
- Use the theories of average variable cost, average total cost, and marginal cost as a basis for decision-making activities.
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