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 price of $20, the firm can earn maximum profits by expanding output to 20. This is where marginal cost (MC) intersects with marginal revenue (MR), which is also the point of maximum profit. Any output level beyond 20 would result in diminishing returns and lower profits. Similarly, reducing output below 20 would also result in lower profits.

Use the Figure to Answer the Following Question(s)