If a firm is operating at an output level where losses are minimized,the firm
A) has no incentive to stay in the industry.
B) is better off exiting the industry.
C) is maximizing profits.
D) will shut down.

Question

Quizplus · Accepted Answer

If a firm is operating at an output level where losses are minimized, it means that the firm is producing at the point where marginal cost equals marginal revenue (MC=MR). At this output level, the firm is able to cover all its variable costs and some portion of its fixed costs. Although the firm is not making a profit, it is not incurring losses as well. In this situation, the firm is maximizing its profits in the short run. Therefore, there is no incentive for the firm to exit the industry, as it is still able to cover its costs.

If a Firm Is Operating at an Output Level Where