Answer to Question #237220 in Macroeconomics for Calista

Question

Explain the three possible profit maximizing positions of perfectly competitive firms in the short-run


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Answer 1

Considering short-run, firms normally maximize profits by identifying outputs which their marginal cost is equal to marginal revenue. Managers maximize their profit if value of a product's last unit is similar to the production cost based on the last unit.

Similarly, within a short run, firms can maximize profit when average total cost tends to be lower than the price that is a firm's making profit symbol.

During a short-run, firms may also maximize profit when the price of a product is similar to the marginal cost.