A profit-maximising firm in a competitive market will not increase production when average revenue exceeds marginal cost.

Question

Quizplus · Accepted Answer

A profit-maximizing firm in a competitive market will continue increasing production as long as the marginal cost is less than or equal to the price (which is equal to the marginal revenue) because this will lead to an increase in profits. Therefore, the statement that the firm will not increase production when average revenue exceeds marginal cost is false.

A Profit-Maximising Firm in a Competitive Market Will Not Increase