At a production level of 2000 for a product, marginal revenue is $3.50 per unit and marginal cost is $3.00 per unit. Do you expect maximum profit to occur at a production level above or below 2000?
A)above
B)below

Question

Quizplus · Accepted Answer

At a production level of 2000, the marginal revenue is greater than the marginal cost ($3.50 > $3.00). This means that producing an additional unit will generate more revenue than the cost to produce it, and therefore, the company should continue to produce more units until the marginal revenue equals the marginal cost. Since the marginal revenue is still positive at 2000 units, the company should continue to increase production, and the maximum profit is expected to occur at a production level above 2000 units.

At a Production Level of 2000 for a Product, Marginal