If a perfectly competitive firm produces an output level at which price is less than marginal costs, then the firm should:
A)raise its price.
B)reduce output to earn greater profits or smaller losses.
C)expand output to earn greater profits or smaller losses.
D)leave its output level unchanged provided it is covering its variable cost.

Question

Quizplus · Accepted Answer

If price is less than marginal cost, then the firm should decrease output because the revenue generated from the last unit produced was less than the cost of producing the last unit.

If a Perfectly Competitive Firm Produces an Output Level at Which