Suppose a price taker knows that it is not going to shut down but it is going to earn a loss.It should pick the output level where

Question

Quizplus · Accepted Answer

If the price taker knows it is going to earn a loss, it should aim to minimize the loss by producing at the level where price equals marginal cost. This is because producing any output level where price is lower than marginal cost will result in an even greater loss. Choosing the output level where total cost is minimized, total revenue is maximized, or the cost of variable factors is minimized may not necessarily minimize the loss in this scenario.

Suppose a Price Taker Knows That It Is Not Going