If price is less than marginal cost,increases in the rate of output will increase profit.

Question

Quizplus · Accepted Answer

If price is less than marginal cost, it means that the firm is not covering its costs and is making a loss. In this situation, increasing the rate of output will further increase the loss, as they will incur higher costs without selling the goods at a profitable price. Therefore, to increase profit, the firm should decrease the rate of output or increase the price until it exceeds the marginal cost.

If Price Is Less Than Marginal Cost,increases in the Rate