At the current level of output,a firm's marginal cost equals 16 and marginal revenue equals 10.The firm
A) is producing the profit-maximizing amount.
B) should produce more.
C) should produce less.
D) Not enough information.

Question

Quizplus · Accepted Answer

The firm is currently operating at a level where marginal revenue (MR) is less than marginal cost (MC), MR<MC. This means that the firm is not maximizing profits at the current level of output. To increase profits, the firm should reduce output, which will lower its marginal cost and increase its marginal revenue until these two values become equal. Therefore, the firm should produce less.

At the Current Level of Output,a Firm's Marginal Cost Equals