Correct Answer: continue to operate as long as it covers even the variable costs

Solution : The correct answer is to continue to operate as long as it covers even the variable costs .

A firm should keep operating, even if it's losing money, as long as it covers the costs that change with production (like materials or labour). This is because there are fixed costs (like rent and salaries) that the firm can't avoid. If it shuts down, it still has to pay these fixed costs but won't make any money. So, it's better to keep going, even if it means a short-term loss.