Exhibit 10-8
-Assume the firm in Exhibit 10-8 is currently charging price P and producing output level Q. In order to maximize profit (or minimize loss), the firm should

Question

Exhibit 10-8 
-Assume the firm in Exhibit 10-8 is currently charging price P and producing output level Q. In order to maximize profit (or minimize loss), the firm should

Quizplus · Accepted Answer

According to the exhibit, the marginal cost curve intersects the marginal revenue curve at point A, which indicates that the firm is currently operating at an output level where price is greater than marginal cost. Therefore, the firm can increase its profit by producing more and selling at a lower price, which will reduce the gap between price and marginal cost. This can be achieved by choosing a price lower than P and increasing output level above Q. Therefore, the firm should charge less and sell more (option B) to maximize profit.

Exhibit 10-8 -Assume the Firm in Exhibit 10-8 Is Currently Charging Price