-In Exhibit I-7, the price is fixed at $14. This firm is currently operating where MR = MC. What do you advise this firm to do?
A) It should shut down.
B) It could increase profit by increasing output.
C) It could increase profit by decreasing output.
D) It should continue to operate at its current output.
E) It should decrease price.

Question

-In Exhibit I-7, the price is fixed at $14. This firm is currently operating where MR = MC. What do you advise this firm to do?
A) It should shut down. 
B) It could increase profit by increasing output. 
C) It could increase profit by decreasing output. 
D) It should continue to operate at its current output. 
E) It should decrease price.

Quizplus · Accepted Answer

When a firm is operating where marginal revenue (MR) equals marginal cost (MC), it is maximizing its profits given its constraints. Therefore, the firm should continue to operate at its current output.

-In Exhibit I-7, the Price Is Fixed at $14