Exhibit 6-4
-For a competitive firm, if any level of production results in losses, the loss-minimizing output level is when
A)marginal product equals marginal cost.
B)marginal revenue equals marginal cost.
C)price equals marginal revenue.
D)total revenue equals total cost.
E)average revenue equals average cost.

Question

Exhibit 6-4 
-For a competitive firm, if any level of production results in losses, the loss-minimizing output level is when
A)marginal product equals marginal cost. 
B)marginal revenue equals marginal cost. 
C)price equals marginal revenue. 
D)total revenue equals total cost. 
E)average revenue equals average cost.

Quizplus · Accepted Answer

The loss-minimizing output level for a competitive firm occurs when it produces the quantity where marginal revenue equals marginal cost. At this output level, the firm will not be able to cover its total costs, but it will minimize the losses it faces. If the firm produces at a lower level of output, its revenue will not cover its variable costs, leading to a greater loss. If the firm produces at a higher level of output, its marginal cost will exceed its marginal revenue, causing an even greater loss. Therefore, the loss-minimizing output level is where MR=MC.

Exhibit 6-4 -For a Competitive Firm, If Any Level of Production Results