If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward sloping, an increase in the marginal cost that causes an upward shift of the curve will _________the profit- maximizing number of units undertaken.

Question

If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward sloping, an increase in the marginal cost that causes an upward shift of the curve will  _________the profit- maximizing number of units undertaken.

Quizplus · Accepted Answer

If the marginal cost curve increases, it means that the cost of producing one more unit has increased. Therefore, a profit-maximizing firm will produce less of the good or service in order to avoid producing units that cost more to produce than their marginal revenue. Thus, there will be a decrease in the profit-maximizing number of units undertaken, which will result in a lower quantity and lower profit.

If the Marginal Benefit Curve Is Linear and Downward Sloping