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In short run, if a competitive firm incurs losses, it will
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- stop production.
- continue to produce as long as it can cover its variable costs.
- raise price of its product.
- go far advertising campaign.
- stop production.
Correct Option: A
In the short run, a firm that is operating at a loss (where the revenue is less that the total cost or the price is less than the unit cost) must decide to operate or temporarily shutdown. It will shutdown if the sale of the goods or services produced cannot even cover the variable costs of production.
