Economics Short Run Vs Long Run Costs Questions
In the long run, average revenue impacts a firm's decision-making process by providing information about the profitability of the firm's operations. If the average revenue is higher than the average cost, it indicates that the firm is generating profits and can continue its operations. This encourages the firm to expand its production and invest in new resources. On the other hand, if the average revenue is lower than the average cost, it suggests that the firm is incurring losses. In such cases, the firm may consider reducing production, exiting the market, or making adjustments to its business strategy to improve profitability. Therefore, average revenue plays a crucial role in guiding a firm's decision-making process in the long run.