As the market price of a good rises,businesses will respond by producing more of that good because

Question

Quizplus · Accepted Answer

At the profit-maximizing level of output, marginal revenue equals marginal cost. When price increases, marginal revenue also increases. So marginal revenue would exceed marginal cost immediately after a price increase. A profit-maximizing business would respond to this situation by producing more, until marginal cost rose enough to be equal to marginal revenue again.

As the Market Price of a Good Rises,businesses Will Respond