If price is greater than the average variable cost,a profit-maximizing firm should ________.
A) contract production until price is equal to marginal cost
B) expand production until price is equal to marginal cost
C) contract production until total revenue is equal to total cost
D) expand production until total revenue is equal to total cost

Question

Quizplus · Accepted Answer

If price is greater than the average variable cost, it means that the firm is making a profit. To maximize profit, the firm should continue to produce as long as the price is above the marginal cost. Therefore, the best choice is to expand production until price is equal to marginal cost.

If Price Is Greater Than the Average Variable Cost,a Profit-Maximizing