TC=FC+VC

 Net revenue= TR-TC

– In the short run, gross revenue must cover the variable cost. Maximum net revenue is obtained when MC=MR.

– If the gross revenue is less than the total cost but greater than variable cost, guiding principle should be keep on production as long as MR is greater than MC.

– In short run, MC=MR point may be at the level of input use that may involve loss instead of profit. Yet at this point, loss will be minimized.

– For taking production decision on such a situation,  one should go on using the resources as long as the added returns remain greater than the added total costs.

– Here the objective is to maximize the profit instead of minimizing losses.