Suppose a perfectly competitive firm is producing 77 units of output, and the marginal cost of the 77^th unit is 11. If the firm can sell each unit of output for $8 and the firm's revenue is sufficient to cover its variable cost, the firm should:

Question

Quizplus · Accepted Answer

Since the marginal cost of the last unit produced is greater than the price per unit, the firm is incurring a loss on that unit. Therefore, the firm should decrease production to reduce its losses.

Suppose a Perfectly Competitive Firm Is Producing 77 Units of Output