If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost the firm could increase profit if it ?
Correct answer: D. increased production
- A. decreased production
- B. maintained production at the current level
- C. temporarily shut down.
- D. increased production
Explanation
When marginal revenue exceeds marginal cost, the extra unit adds more to revenue than to cost. Expanding production therefore increases profit until marginal revenue equals marginal cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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