If a perfectly competitive firm is producing 200 units and, at the 200th unit, the difference between marginal revenue and marginal cost (MR - MC)is positive, which of the following is true?

Question

Quizplus · Accepted Answer

If the difference between MR and MC is positive, it means that the firm can still earn more revenue by producing an additional unit than the cost of producing that unit. Therefore, the firm should increase production to maximize profit. Option A is incorrect because decreasing production would result in even less revenue. Option C is incorrect because if the 200th unit costs more to produce than the firm earns in revenue, the firm would not have reached the point of MR=MC yet. Option D is incorrect because if the MR-MC is positive and the firm has not reached the point of MR=MC yet, it means that the firm can still earn more profit by increasing production.

If a Perfectly Competitive Firm Is Producing 200 Units And