Economics Short Run Vs Long Run Costs Questions
In the long run, marginal revenue plays a crucial role in a firm's decision-making process. It helps the firm determine whether to continue producing at the current level, expand production, or reduce production. If the marginal revenue exceeds the marginal cost, the firm will choose to increase production to maximize profits. Conversely, if the marginal revenue is lower than the marginal cost, the firm may decide to reduce production or exit the market altogether. Therefore, marginal revenue guides the firm's decisions regarding production levels and profitability in the long run.