A price taker's output price is $5 and the firm is producing 37 units with a marginal cost of $3.The firm should

Question

Quizplus · Accepted Answer

The firm is currently producing at a point where marginal cost is less than the output price, which means they are making a profit. They should continue to produce at this level or even increase production to maximize profits. Lowering the price or raising it would not be optimal as it would either decrease revenue or potentially have no effect on demand. Decreasing production or laying off workers would also not be necessary since the firm is currently operating at a profitable level.

A Price Taker's Output Price Is $5 and the Firm