Answer
Ans: option a -- keep producing in the short run but exit the market in the long run.
Work Step by Step
In the short run, all except some of the variables are fixed. Hence, if in the short run a firm is able to cover up its average variable cost then it will continue production because of two reasons. Firstly, it will be a total loss for the firm if it shuts down in the short run because even after shutting down it will have to bear the cost of fixed factors. Secondly, there is a possibility that the prices will go up and the firm will become profitable in the long run.
In the long run, all the factors of production are variable and the firm can choose to shut down if it is unable to recover both its average variable and fixed costs.
