Production Decisions in Perfect Competition

Output is the amount of a good produced; revenue is the amount of income made from sales minus all business expenses.

In order to maximize profit, the firm should set marginal revenue (MR) equal to the marginal cost (MC).

A firm will implement a production shutdown if the revenue from the sale of goods produced cannot cover the variable costs of production.

The total revenue-total cost perspective and the marginal revenue-marginal cost perspective are used to find profit maximizing quantities.

The short run is the conceptual time period where at least one factor of production is fixed in amount while other factors are variable.