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Will revenue-maximizing firms have short-run profits as large as or larger than profit-maximizing firms? If so,...

Will revenue-maximizing firms have short-run profits as large as or larger than profit-maximizing firms? If so, when? If not, why not?

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Answer #1

Profit = Revenue - costs

..

A profit maximizing firm produces a level of output where MR (marginal revenue) = marginal cost (MC), this means that the slope of Total cost (TC) and Total revenue (TR).

Revenue maximizing firms will produce a level of output at which it's Total revenue is maximised. When Total revenue is maximised MR reaches zero.

But the costs are not zero so the firms profit are less in revenue maximizing than in profit maximizing level of out.

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