An article in the Wall Street Journal about companies drilling in shale oil fields notes that"banks have provided financing when[oil] producers spend more cash than they take in fromoperations."

Source: Bradley Olson and RebeccaElliott, "Frackers Face Harsh Reality as Wall Street BacksAway," Wall Street Journal, February24, 2019.

If a company spends more to produce oil than it receives in revenue from selling theoil, it is ___?___

If a company is suffering aloss, why does the company remain inbusiness, and why are banks willing to lend itmoney?

A firm should continue to produce in the shortrun, even if it is suffering aloss, provided that it can cover its

A.

fixed costs. That banks were willing to lend these firms money indicates that they expected the firms would eventually be able to at least break even.

B.

fixed costs. That banks were willing to lend these firms money indicates that they expected the firms would eventually earn large profits.

C.

variable costs. That banks were willing to lend these firms money indicates that they expected the firms would eventually be able to at least break even.

D.

total costs. That banks were willing to lend these firms money indicates that they expected the firms would eventually earn large profits.