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)
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 ...
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.