If a firm in a perfectly competitive market is experiencing losses but decides to continue production in the short run, what underlying condition must be true for this decision to be rational?

In a perfectly competitive market, a firm might decide to keep producing even if it's losing money in the short run if it can still cover its variable costs. This means that the revenue from selling its products is enough to pay for the costs that change with production, like materials and labor. For example, if a bakery has high fixed costs for rent and equipment but can still earn enough from selling bread to cover the cost of flour and workers, it might choose to keep baking, even if it's not making a profit overall. By continuing to operate, the firm can avoid losing more money than it would if it stopped production completely. This decision helps the firm stay afloat until market conditions improve.