Final answer:
A firm takes several actions to achieve its goals of maximizing profits in a perfectly competitive market. These actions include analyzing costs, determining the quantity of output to produce, and seeking the point where profits are highest or losses are lowest.
Step-by-step explanation:
A firm takes several actions to achieve its goals of maximizing profits in a perfectly competitive market. These actions include analyzing costs, determining the quantity of output to produce, and seeking the point where profits are highest or losses are lowest.
In the short run, firms will analyze costs to identify the quantity of output that maximizes profits or minimizes losses. This involves considering fixed costs, variable costs, and total revenue. By finding the level of output where the difference between total revenue and total cost is highest, a firm can maximize its profits.
For example, if a firm's total revenue is $500 and its total cost is $300 at a certain level of output, it would have a profit of $200. The firm may adjust its production quantity to increase revenue or reduce costs to achieve higher profits.