If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would:

Question

Quizplus · Accepted Answer

When the market price is below ATC (Average Total Cost), the firm is not covering its total costs, implying negative economic profits. However, if MC (Marginal Cost) is less than the market price, producing and selling an additional unit would add more to revenue than to costs, thus increasing profit (though economic profits remain negative until the price covers the ATC).

If the Market Price Was Below the ATC and at the Current