It's logical, it's a rule of thumb, it's an economic guideline: As long as MR MC, and the firm responds by increasing the quantity it produces,
A) profit will eventually fall to zero
B) profit will increase
C) profit will decrease
D) profit will remain unchanged
E) the firm will minimize loss

Question

It's logical, it's a rule of thumb, it's an economic guideline: As long as MR > MC, and the firm responds by increasing the quantity it produces,
A) profit will eventually fall to zero
B) profit will increase
C) profit will decrease
D) profit will remain unchanged
E) the firm will minimize loss

Quizplus · Accepted Answer

When Marginal Revenue (MR) is greater than Marginal Cost (MC), increasing production will increase the firm's profit because each additional unit produced adds more to revenue than it adds to costs.

It's Logical, It's a Rule of Thumb, It's an Economic