If the marginal revenue is less than the marginal cost then to profit maximise a firm should ?
Correct answer: A. Reduce output
- A. Reduce output
- B. Increase output
- C. Leave output where it is:
- D. Increase costs
Explanation
When marginal revenue is below marginal cost, the last units add more to cost than to revenue. Reducing output removes these loss-making units and moves the firm toward the profit-maximising point where MR equals MC.
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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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