If a firm is producing an output rate at which marginal cost is equal price, the firm

Question

Quizplus · Accepted Answer

When a firm is producing an output rate where marginal cost is equal to price, it is producing at the point of profit maximization, where the additional cost of producing an additional unit of output is equal to the additional revenue received from selling that unit. Therefore, the firm should continue producing at this level and is already maximizing profits. Option B and C are not correct because the firm is already producing at the profit-maximizing level, so changing the output level would actually result in a reduction in profit. Option D is not correct because the fact that the firm is already covering its variable costs at this output level is implied by the fact that it is producing at a point where marginal cost is equal to price.

If a Firm Is Producing an Output Rate at Which