<P> For a firm in a perfectly competitive market for its output, the revenue function will simply equal the market price times the quantity produced and sold, whereas for a monopolist, which chooses its level of output simultaneously with its selling price, the revenue function takes into account the fact that higher levels of output require a lower price in order to be sold . An analogous feature holds for the input markets: in a perfectly competitive input market the firm's cost of the input is simply the amount purchased for use in production times the market - determined unit input cost, whereas a monopsonist's input price per unit is higher for higher amounts of the input purchased . </P> <P> The principal difference between short - run and long - run profit maximization is that in the long run the quantities of all inputs, including physical capital, are choice variables, while in the short run the amount of capital is predetermined by past investment decisions . In either case there are inputs of labor and raw materials . </P> <P> Any costs incurred by a firm may be classed into two groups: fixed costs and variable costs . Fixed costs, which occur only in the short run, are incurred by the business at any level of output, including zero output . These may include equipment maintenance, rent, wages of employees whose numbers cannot be increased or decreased in the short run, and general upkeep . Variable costs change with the level of output, increasing as more product is generated . Materials consumed during production often have the largest impact on this category, which also includes the wages of employees who can be hired and laid off in the short - run span of time under consideration . Fixed cost and variable cost, combined, equal total cost . </P> <P> Revenue is the amount of money that a company receives from its normal business activities, usually from the sale of goods and services (as opposed to monies from security sales such as equity shares or debt issuances). </P>

At the most profitable level of production a firms marginal cost will be the market price