When examining the behavior of firms, economists look at the firm's costs and the firm's revenues. A firm's costs are the total amount of money it needs to spend to operate. These include items like material costs, production costs and payroll. Revenue refers to the total amount of money that a company is taking in. It is important to note that revenue and profit are not the same thing. A firm's profit is the amount of money by which revenue exceeds costs.
As opposed to aggregate costs and aggregate revenue, marginal costs and marginal revenue are terms that refer to the cost and revenue that come from producing and selling an individual item. Economists create charts with an item's marginal cost or revenue on the Y axis, and the amount of a product on the X axis. These charts show what the cost of producing the Nth item will be, where N is a number on the X axis.
The question of when losses are minimized in economics has a simple answer, and a more detailed answer. The more obvious answer is that losses are minimized when the difference between aggregate costs and aggregate revenue is as close to zero possible. Using marginal costs and marginal revenues, however, can give a more detailed answer. By plotting marginal costs and marginal revenues on charts, you can identify after how many units the firm will stop losing money.
In microeconomic theory, the goal of a firm is not to maximize profits, but to maximize its total revenue. According to theories of competition, firms will need to keep their prices as low as they can to compete with other firms that sell similar products. Consequently, the goal of firms is to produce units until the marginal cost of producing a unit is equal to the marginal revenue earned by this unit. This is the point at which economics believes losses will be considered minimized.