Competitive firms that earn a loss in the short run should

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Competitive business firms that earn a loss in the short-run should shutdown if price (P) is lesser than average variable cost (AVC).

<h3>What is an average variable cost?</h3>

An average variable cost (AVC) can be defined as the cost of production per unit item incurred by a business firm and divided by total output of production. Thus, it's calculated by dividing total variable cost (TVC) by total output of production.

As a general rule in Economics, competitive business firms that earn a loss in the short-run are advised to shutdown their production when price (P) is lesser than average variable cost (AVC).

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