Figure 8-5
-If the marginal profit from increasing output by one unit is negative, then to attain an optimum, the firm should
A)increase output until marginal profit equals zero.
B)reduce output until marginal profit equals zero.
C)increase output until marginal profit is maximized.
D)reduce output until marginal profit is maximized.

Question

Figure 8-5 
-If the marginal profit from increasing output by one unit is negative, then to attain an optimum, the firm should
A)increase output until marginal profit equals zero. 
B)reduce output until marginal profit equals zero. 
C)increase output until marginal profit is maximized. 
D)reduce output until marginal profit is maximized.

Quizplus · Accepted Answer

If the marginal profit from increasing output by one unit is negative, it means that the cost of producing one additional unit is greater than the revenue earned from selling that unit. Therefore, the firm should reduce output until marginal profit equals zero in order to minimize losses. If the firm were to increase output until marginal profit is maximized, it would be producing too much and incurring losses on each additional unit produced.

Figure 8-5 -If the Marginal Profit from Increasing Output by One Unit