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making the demand curve perfectly elastic and the firm cannot influence the price.
The firm is producing at profit maximization, the firm is producing the quantity at which marginal cost
equals marginal revenue.
MR>MC the firm should increase the output because for any raise in production, the additional
revenue would exceed the additional cost in other means, profit is increasing. Thus, the firm can
increase profit by increasing production.
MR<MC the firm should decrease the output. If the firm reduce production by 1 unit, the cost saved
would exceed the revenue lost. Therefore, the firm should reduce production to increase its profit.
B Normal profit
In the long run, the firm has same cost which the market price is equal to the average cost, the firm
makes sufficient revenue to cover its total costs.
The firm is experiencing loss because the average costs exceed the current market price. The firm will
have to shutdown the production to save the variable costs of making its product and the revenue the
firm would earn is less than the variable cost of its production.