If both marginal cost and marginal revenue increase, a firm ?
Correct answer: C. will require further information on how to respond
- A. Should increase output
- B. Should reduce output
- C. will require further information on how to respond
- D. Should not change output
Explanation
An increase in both marginal revenue and marginal cost does not by itself show whether producing another unit is profitable. The firm needs to compare their new levels, so further information is required.
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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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