In the short run, if price is below AC, maximizing profits really means minimizing total losses.

Question

Quizplus · Accepted Answer

In the short run, if the price is below the average cost (AC), the firm will not be able to cover all its costs and will experience losses. In this situation, the firm's goal should be to minimize losses, which involves producing an output level where the marginal cost (MC) equals the marginal revenue (MR). This will minimize the gap between total revenue (TR) and total variable costs (TVC), which ultimately reduces total losses. Therefore, maximizing profits in the short run means minimizing total losses when the price is below AC.

In the Short Run, If Price Is Below AC, Maximizing