In monopoly and perfect competition,a firm should expand production when
A)Marginal revenue is below marginal cost.
B)Price is below marginal cost.
C)Marginal revenue is above marginal cost.
D)Price is above marginal cost.

Question

Quizplus · Accepted Answer

In both monopoly and perfect competition, a firm should expand production when marginal revenue is above marginal cost. This is because producing an additional unit will bring in more revenue than the cost of producing it. When marginal revenue is below marginal cost, expanding production will result in a loss for the firm. When the price is below marginal cost (which can occur in perfect competition), it is not profitable for the firm to expand production, as the cost of producing an additional unit will be higher than the revenue received for selling it.

In Monopoly and Perfect Competition,a Firm Should Expand Production When