If a profit-maximizing firm finds that,at its current level of production,MR MC,it will
A) earn greater profits than if MR = MC.
B) increase output.
C) decrease output.
D) shut down.

Question

If a profit-maximizing firm finds that,at its current level of production,MR > MC,it will
A) earn greater profits than if MR = MC.
B) increase output.
C) decrease output.
D) shut down.

Quizplus · Accepted Answer

If a profit-maximizing firm finds that MR > MC, then it should increase its output. This is because producing more units will generate more revenue than the additional cost of producing them. By increasing output, the firm can increase its profits until MR = MC. Therefore, the answer is B.

If a Profit-Maximizing Firm Finds That,at Its Current Level of Production,MR