If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45, then in the short run this firm should:
A) increase its plant size.
B) change its technology.
C) produce more than 99 units of output.
D) produce less than 100 units of output.
E) shut down.

Question

Quizplus · Accepted Answer

The firm should continue to produce more units of output as long as the marginal revenue exceeds the marginal cost. In this case, the marginal revenue (MR) is $50, which is greater than the marginal cost (MC) of $45. Therefore, the firm should continue to produce more output and increase its production level beyond 99 units, where MR=MC.

If a Firm's Marginal Revenue from Its 100th Unit of Output