Either a rise in marginal cost or a fall in marginal revenue could cause a firm to reduce its output.

Question

Quizplus · Accepted Answer

If marginal cost rises, it becomes more expensive for the firm to produce each additional unit of output, making it less profitable to continue producing at the same level. Similarly, if marginal revenue falls, the firm will earn less revenue for each additional unit sold, making it less profitable to continue producing at the same level. In both cases, reducing output can be a rational response to maintain profitability.

Either a Rise in Marginal Cost or a Fall in Marginal