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

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 decreasing the quantity it produces,
A) profit will increase to infinity
B) profit will increase
C) profit will decrease
D) profit will remain unchanged
E) loss will be minimized

Quizplus · Accepted Answer

When MR (Marginal Revenue) is greater than MC (Marginal Cost), increasing production (not decreasing) is typically the profitable action. Decreasing production under these conditions would likely lead to decreased profits, as the firm is not taking full advantage of the profitable margin between revenue and cost per additional unit.

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