If a firm decreases output when MR MC, then:
A) profit will equal zero.
B) profit will increase.
C) profit will decrease.
D) profit will remain the same.
E) the firm is minimizing losses.

Question

If a firm decreases output when MR > MC, then:
A) profit will equal zero.
B) profit will increase.
C) profit will decrease.
D) profit will remain the same.
E) the firm is minimizing losses.

Quizplus · Accepted Answer

If MR > MC, the firm can increase profit by producing more. Therefore, if the firm decreases output in this situation, it will decrease profit. The only exception to this would be if the firm is currently incurring losses and by decreasing output, it is able to minimize these losses. However, this is not mentioned in the question, so the best answer is C.

If a Firm Decreases Output When MR > MC, Then