If MR MC for a competitive firm,it should raise its price and increase its level of output.

Question

If MR > MC for a competitive firm,it should raise its price and increase its level of output.

Quizplus · Accepted Answer

If MR > MC, a competitive firm should not raise its price but rather increase its level of output. This is because in a perfectly competitive market, price is determined by supply and demand, and individual firms do not have the power to set their own prices. Instead, they take the market price as given and adjust their output accordingly to maximize profits. When MR > MC, producing and selling additional units of output will increase profits as the revenue gained from selling additional units exceeds the cost of producing those additional units. Therefore, the firm should increase its level of output until MR = MC, rather than raising its price.

If MR > MC for a Competitive Firm,it Should Raise