If a firm is producing where MR MC
A) the revenue gained by producing one more unit of output exceeds the cost incurred by doing so.
B) the revenue gained by producing one more unit of output equals the cost incurred by doing so.
C) the revenue gained by producing one more unit of output is less than the cost incurred by doing so.
D) the firm is already maximizing profits because revenue is being increased by more than costs.

Question

If a firm is producing where MR > MC
A) the revenue gained by producing one more unit of output exceeds the cost incurred by doing so.
B) the revenue gained by producing one more unit of output equals the cost incurred by doing so.
C) the revenue gained by producing one more unit of output is less than the cost incurred by doing so.
D) the firm is already maximizing profits because revenue is being increased by more than costs.

Quizplus · Accepted Answer

When MR (Marginal Revenue) is greater than MC (Marginal Cost), it means that the revenue from selling one additional unit of a product is higher than the cost of producing that unit, indicating that producing more can increase profits.

If a Firm Is Producing Where MR > MC