Exhibit 108 Assume the firm in Exhibit 108 is currently charging price P and producingoutput level Q.In order to maximize profit (or minimize loss), the firmshould

Question

Exhibit 10­8  Assume the firm in Exhibit 10­8 is currently charging price P and producingoutput level Q.In order to maximize profit (or minimize loss), the firmshould

Quizplus · Accepted Answer

The firm is currently producing at a point where marginal cost (MC) is greater than marginal revenue (MR), indicated by the gap between the blue (MC) and red (MR) lines. This means that the firm is producing at a point where it could increase profit by producing less and charging a lower price. Option B, charging less and selling more, would allow the firm to increase revenue and reduce the gap between MC and MR, resulting in higher profits (or smaller losses).

Exhibit 10­8 Assume the Firm in Exhibit 10­8 Is

Exhibit 108 Assume the Firm in Exhibit 108 Is