L QUANTITY M Refer to Figure 16-8. Which of the following best describes the profit-maximizing outcome for the fir Oa. This firm is incurring a short-run loss, but will earn zero profit in the long run. b. This firm is in long run equilibrium and will continue to earn zero profit. Oc. This firm is earning a short-run profit, but will earn zero profit in the long run. Od. This firm is earning zero profit in the short run, but will earn a positive profit in the long run.

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Profit Maximization

Economic activity is related to the use of scarce resources of the economy that are used for producing goods and services which are required to satisfy various demands of the people. In other words, it can be said that it is all about satisfying the unlimited demands of individuals with the limited resources available. The production decision is taken by the producers or the firms. In economics, the terms ‘producers’, ‘suppliers’, and ‘firms’ are interchangeable. Now the question arises, what does a firm actually mean?