Question

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. A) It follows that the a. production of the 100th unit of output increases the firm's average total cost by $1. b. production of the 101st unit of output must increase the firm’s profit by more than $1. c. firm's profit-maximizing level of output is less than 100 units. d. production of the 100th unit of output increases the firm's profit by $1.

Answer 1

The correct answer is option d.

Step-by-step explanation:

The 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10.

The profit to a firm is maximized when the marginal revenue earned and marginal cost incurred are equal.

When the firm is producing the 100th unit of output the marginal revenue is $1 higher than the marginal cost. This implies that the production of the 100th unit increases the firm's profit by $1.