Exhibit 7-4 Marginal cost and revenue for a firm In Exhibit 7-4, this firm is currently producing 16 units of output. What would you advise this firm to do?

Question

Exhibit 7-4  Marginal cost and revenue for a firm  In Exhibit 7-4, this firm is currently producing 16 units of output. What would you advise this firm to do?

Quizplus · Accepted Answer

At 16 units of output, the marginal cost is equal to the marginal revenue, which means the firm is maximizing its profits. Any increase or decrease in output would lead to a decrease in profits as marginal cost would exceed marginal revenue. Therefore, the firm should remain at 16 units of output.

Exhibit 7-4 Marginal Cost and Revenue for a Firm in Exhibit