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    Profit-maximizing or loss-minimizing output graphs

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    For each of the following graphs, identify the firm's profit-maximizing (or loss-minimizing) output. Is each firm making a profit? If not, should the firm continue to produce in the short run?
    (See Attachment for Graphs)

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    Solution Preview

    All of these graphs show a perfectly competitive firm. Demand is perfectly elastic (horizontal), so Demand = Price = Marginal Revenue.
    For all three graphs, the profit-maximizing or loss-minimizing output is the Quantity ...

    Solution Summary

    This solution shows how to identify the profit-maximizing or loss-minimizing output on a firm's revenue and cost graph. It also shows how to determine whether the firm should continue to produce or shut down in the short run.