Question

State the profit maximization of a firm in the short run under perfectly competitive market​

Answer 1

Answer:

Explanation:

In economics, profit maximization is the short run or long run process by which a firm may determine the price, input, and output levels that lead to the highest profit. Neoclassical economics, currently the mainstream approach to microeconomics, usually models the firm as maximizing profit.

There is a very basic concept of understanding Profit maximization either for Perfect Competition or another market model. For almost all markets, the concept is similar. If Q is output of the firm, Total Revenue is : So a profit for a firm is the difference between the Revenue it receives and the cost it incurs during the production process.

Since a perfectly competitive firm must accept the price for its output as determined by the product’s market demand and supply, it cannot choose the price it charges. Rather, the perfectly competitive firm can choose to sell any quantity of output at exactly the same price.

Not all firms make supernormal profits in the short run. Their profits depend on the position of their short run cost curves. Some firms may be experiencing Losses because their average costs exceed the current market price. Other firms may be making normal profits where total revenue equals total cost (i.e. they are at the break-even output).