Use the figure to answer the following question(s).
Figure 9-6

If the market price in Figure 9-6 increases to $20, what should the firm do?
A) produce an output of 15
B) expand output to 20
C) expand output to 25
D) increase its price to $25

Question

Use the figure to answer the following question(s).
Figure 9-6

If the market price in Figure 9-6 increases to $20, what should the firm do?
A) produce an output of 15 
B) expand output to 20 
C) expand output to 25 
D) increase its price to $25

Quizplus · Accepted Answer

At a market price of $20, the firm can maximize its profit by expanding output to 20 units, which is where marginal cost equals marginal revenue. Any higher output would result in a marginal cost greater than marginal revenue, decreasing profit. Increasing price to $25 would result in a lower quantity demanded and lower revenue, also decreasing profit.

Use the Figure to Answer the Following Question(s)