If a firm is producing a quantity along the upward sloping portion of its marginal cost curve at which marginal cost exceeds price and is earning positive economic profits,it should
A) continue to produce this quantity.
B) decrease the quantity produced because doing so will increase profit.
C) increase the quantity produced because profits are still positive.
D) wait for the price to increase to its current marginal cost.

Question

Quizplus · Accepted Answer

When marginal cost exceeds price, reducing output will lower costs more than it reduces revenue, thus increasing profit. This is because the firm is producing in an inefficient range where the cost of producing an additional unit is higher than the revenue it brings in.

If a Firm Is Producing a Quantity Along the Upward