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Open it osts in the short run as a business entity. In the short run, a business is capable of operating in a loss situation as long as it covers its variable costs even though it is not earning sufficient revenue to cover all fixed cost obligations. <span>If variable costs cannot be covered in the short run (P < AVC), the firm will shut down operations and simply absorb the unavoidable fixed costs. This problem occurs at output Q 1 , which corresponds to point C where price is less than average variable cost. However, in the long run, to remain in business, the price must cover al
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