Question

At its current level of output, a firm’s total revenue is greater than its total variable cost but less than its total cost. if the firm is producing at the point where marginal revenue is equal to marginal cost, what should the firm do to maximize profit in the short run?

Answer 1

In order to maximize profit in the short run; Company is to continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.

How to maximize profit?

Every firm in the market operates with the primary aim of making profit, which is different from the government that has a primary aim of creating welfare for the people. Thus, a profit-maximizing level of output is determined at the point where marginal revenue (MR) equals marginal cost (MC).

Finally, In order to maximize profit in the short run what the company should do is to continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.

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