Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, marginal cost exceeds this firm's price. To maximize profits, Dell should
A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.

Question

Quizplus · Accepted Answer

Since marginal cost is higher than Dell's price, it means that each additional unit produced is costing more than the revenue generated. This situation leads to losses which reduce profits. Therefore, to maximize profits, Dell should decrease its output to the point where marginal cost is equal to price, which is the profit-maximizing level of output.

Assume Dell Computer Company Operates in a Perfectly Competitive Market