A firm is currently operating where the MC of the last unit produced = $64, and the MR of this unit = $70. What would you advise this firm to do?
A) Shut down.
B) Increase output.
C) Stay at current output.
D) Decrease output.
E) Decrease price.

Question

Quizplus · Accepted Answer

The rule for profit maximization is to produce at the quantity where MC=MR. In this case, the marginal revenue of producing the last unit exceeds the marginal cost, meaning the firm will earn an additional profit of $6 ($70 - $64) by producing another unit. Therefore, the firm should increase output to maximize profits.

A Firm Is Currently Operating Where the MC of the Last