Pretty Polly produces dresses for little girls. At its current advertising level, Pretty Polly's marginal cost of advertising is $500,000 and their marginal benefit is $500,000. Which of the following is true?

Question

Quizplus · Accepted Answer

At the current advertising level, the marginal cost is equal to the marginal benefit, indicating that the firm is currently maximizing its net profit. If they were to increase or decrease their advertising level, their marginal benefit and cost would no longer be equal, and their net profit would decrease. Therefore, the best choice is to continue with the current advertising level.

Pretty Polly Produces Dresses for Little Girls