4 What decisions must a firm make to maximise profit?

The goal of the competitive firm is to maximise economic profit, given the constraints it faces. To achieve its goal, a firm must decide:
◆ How to produce at minimum cost ◆ What quantity to produce ◆ Whether to enter or exit a market You’ve already seen how a firm makes the first decision.
It does so by operating with the plant that minimises longrun average cost – by being on its long-run average cost curve. We’ll now see how the firm makes the other two decisions. We start by looking at the firm’s output decision.