Figure 14-3
-Refer to Figure 14-3.When price rises from P2 to P3,the firm finds that

Question

Figure 14-3 
-Refer to Figure 14-3.When price rises from P2 to P3,the firm finds that

Quizplus · Accepted Answer

As price rises from P2 to P3, the marginal revenue curve shifts to the right. At a production level of Q2, the firm still earns a positive profit because marginal revenue still exceeds marginal cost. When it increases output to Q3, the firm's marginal cost exceeds its marginal revenue, which means that it is no longer earning a profit. Moreover, if the firm expands output to Q4, it would experience even greater losses. Therefore, the best choice is to decrease output from Q3 to Q2, where marginal revenue equals marginal cost and the firm earns a positive profit.

Figure 14-3 -Refer to Figure 14-3.When Price Rises from P2 to P3,the