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a. total revenue exceeds total cost. b. total cost exceeds total revenue. c. a one-unit decrease in output will increase the firm's profit. d. a one-unit increase in output will increase the firm's profit.

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A competitive firm should decrease output by one unit to increase profit if marginal cost exceeds marginal revenue, since this leads to eliminating less profitable or loss-inducing production.

  • If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then the correct answer is c) a one-unit decrease in output will increase the firm's profit.
  • This conclusion can be drawn because when marginal costs surpass marginal revenues, each additional unit of production adds more to cost than to revenue, hence reducing profits.
  • As per the profit-maximization rule, a competitive firm will seek to adjust its output to the point where marginal revenue is equal to marginal cost (MR=MC).
  • By reducing its output level slightly, the firm can eliminate the production of those units that cost more to make than they earn in revenue, thus increasing overall profitability.

Question:

8.If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Group of answer choices

a) total revenue exceeds total cost.

b) total cost exceeds total revenue.

c) a one-unit decrease in output will increase the firm's profit.

d) a one-unit increase in output will increase the firm's profit.

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