Suppose a firm produces the level of output at which the marginal cost of the last unit produced equals the price of the good. Which of the following statements is always true?
A)The firm should shutdown if its total revenue is less than its variable cost.
B)The firm will earn a positive economic profit.
C)The firm is maximizing its profit.
D)The firm should produce more if its economic profit is positive.

Question

Quizplus · Accepted Answer

In general, a firm maximizes its profit by choosing the level of output at which price equals marginal cost. However, if a firm's total revenue isn't large enough to cover its variable cost, then the firm should shut down.

Suppose a Firm Produces the Level of Output at Which