Loss
A loss occurs when Total Revenue is less than Total Cost (TR < TC), resulting in negative profit or economic loss. Price falls below Average Total Cost (P < AC), and the firm fails to earn even normal profit.
Real World
Flybe, the UK regional airline, operated at a loss for years as revenues failed to cover total costs, eventually ceasing operations in 2020 when it could no longer cover even its variable costs of fuel and crew.
Exam Focus
Explain the shutdown rule: a loss-making firm stays open short-run only if P > AVC — state this condition explicitly for full marks.
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