If at its current production level, a dominant firm's marginal cost is $4 and its residual marginal revenue is $3, which of the following statements is true?

Question

Quizplus · Accepted Answer

The dominant firm is producing where MR=MC, which is at a quantity where MR is less than the price. This means that the firm is not able to capture the full value of its production, and producing more would only result in further losses. Thus, the firm should decrease production to minimize losses and maximize profit.

If at Its Current Production Level, a Dominant Firm's Marginal