Final answer:
The basic goal of a firm when setting a level of output is to maximize profit through analyzing price-demand relationship, production costs, and market conditions.
Step-by-step explanation:
The basic goal of a firm when it sets a level of output is to maximize its profit. By determining the optimal level of output that maximizes revenue and minimizes costs, a firm can achieve its goal of maximizing profit. This can be done by analyzing the relationship between price and demand, considering production costs, and evaluating market conditions.
For example, a firm may set a level of output where the marginal cost of producing an additional unit equals the marginal revenue earned from selling that unit. This ensures that the firm is maximizing its profit per unit.
Additionally, the firm may consider other factors such as market competition, consumer preferences, and the possibility of economies of scale when setting the level of output.
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