If a firm increases output when MR MC, then:
A) profit will equal zero.
B) profit will increase.
C) profit will decrease.
D) profit will remain the same.

Question

If a firm increases output when MR > MC, then:
A) profit will equal zero.
B) profit will increase.
C) profit will decrease.
D) profit will remain the same.

Quizplus · Accepted Answer

If MR (marginal revenue) is greater than MC (marginal cost), then adding one more unit of output will result in more revenue coming in than the cost to produce that unit. This means that the firm is making a profit on each additional unit produced. Therefore, increasing output will lead to an increase in profit.

If a Firm Increases Output When MR > MC, Then