If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

Question

Quizplus · Accepted Answer

If marginal cost is exceeding marginal revenue, the firm is producing beyond the profit-maximizing level of output. This means that a one-unit decrease in output would decrease costs more than it would decrease revenue, resulting in an increase in profit. Therefore, option C is correct. Options A and B are incorrect as the question states that the firm is not producing at a profit-maximizing level of output, so average revenue not necessarily exceed marginal cost, and the firm is not earning a positive profit.

If a Competitive Firm Is Currently Producing a Level of Output