Question

Reinterpreting MR=MC, the profit-maximizing level of output is the level of output, where ... What if the firm doesn't make a profit at any output? In this case, we would want to minimize the ... Sometimes a loss may be ____, if we have high fixed costs. The _____ still gives the loss-minimizing level of output?

Answer 1

Profit maximization occurs when marginal revenue equals marginal cost. If a firm doesn't make a profit, it would want to minimize its losses. Sometimes, losses may be unavoidable due to high fixed costs.

Step-by-step explanation:

Profit maximization occurs at the level of output where marginal revenue (MR) is equal to marginal cost (MC). At this level, the firm is maximizing its profits. However, if the firm doesn't make a profit at any output, it would want to minimize its losses. This is done by producing at the level of output where losses are minimized. Sometimes, a loss may be unavoidable if the firm has high fixed costs. In this case, the firm should produce at the level of output where losses are minimized.