A firm would find it profitable to increase its production when
A) its marginal revenue exceeds its marginal cost.
B) its fixed costs decrease.
C) higher resource costs raise its marginal costs.
D) new competitors reduce the demand for the firm's product.

Question

Quizplus · Accepted Answer

If a firm's marginal revenue exceeds its marginal cost, it means that producing one more unit of output would bring in more revenue than the cost of producing it. This would result in an increase in profit for the firm, so it would find it profitable to increase its production.

A Firm Would Find It Profitable to Increase Its Production