Explanation:
When a firm earns more revenue than the cost incurred to produce goods or services, it is said to be making a profit. However, if the average revenue earned by the firm is less than the average cost incurred, the firm is said to be incurring a loss.

Answer:
If the average cost is higher than the average revenue, then the firm incurs a loss. This means that the firm is spending more money to produce goods or services than it is earning through sales. In such a scenario, the firm is not able to cover its costs, and therefore, it is operating at a loss.

Implications of Loss:
When a firm incurs a loss, it faces several implications. These include:

1. Decrease in cash flow: A loss-making firm has less cash to pay for its expenses and invest in growth opportunities.

2. Decrease in employee motivation: When a firm is not doing well financially, it may be forced to lay off employees or reduce their salaries, which can lead to decreased motivation and morale.

3. Decrease in shareholder value: A loss-making firm is not able to generate returns for its shareholders, which can lead to a decrease in shareholder value.

4. Decrease in creditworthiness: A loss-making firm may find it difficult to secure loans from banks and other financial institutions because of its poor financial performance.

5. Decrease in market share: A loss-making firm may lose market share to its competitors who are able to offer better products or services at a lower cost.

Conclusion:
In conclusion, a firm that incurs a loss is in a difficult position. It is important for the firm to identify the reasons for the loss and take corrective action to improve its financial performance. The firm may need to reduce its costs, increase its revenue, or both to turn the situation around.

Loss