Answer
total revenue
variable cost
Work Step by Step
For the short-run, a firm can continue its unprofitable business if it is able to cover its variable cost.
Even if the firm is losing money (not covering total cost), it should keep operating in the short run as long as it can cover its variable costs.
That’s because it can still pay part of its fixed costs; shutting down would mean a larger loss equal to all fixed costs.
So a firm will continue to operate an unprofitable business if total revenue exceeds total variable cost.
