Question

The profit-maximizing rule leaves room for cases where it is both possible and reasonable for a firm to operate at a loss over the long run.

Answer 1

It is a false statement that profit-maximizing rule leaves room for cases where it is both possible and reasonable for a firm to operate at a loss over the long run.

What is a profit-maximizing rule?

The rule of profit maximization says that MC = MR where the MC means marginal costs and MR means marginal revenue.

As all costs are variable in the long run, then, a firm must always set its profit to zero by ceasing operation.

Therefore, It is false that profit-maximizing rule leaves room for those cases.

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