Question

if current output is less than the profit-maximizing output, then the next unit produced question 9 options: a) may or may not increase profit. b) will decrease profit. c) will increase cost more than it increases revenue. d) will increase revenue without increasing cost. e) will increase revenue more than it increases cost.

Answer 1

The next unit produced when current output is less than profit-maximizing will increase revenue more than it increases cost. This is based on the principle of profit maximization where profits are maximized when MR equals MC, which would be the output level of 5 in the given example.

Step-by-step explanation:

If current output is less than the profit-maximizing output, then the next unit produced will increase revenue more than it increases cost. This concept is tied to the principle of maximizing profits at the point where marginal revenue (MR) equals marginal cost (MC). As long as the marginal revenue of producing an additional unit is greater than the marginal cost, then producing that unit will increase overall profit. An example of this is when output expands from 4 to 5 units in a scenario where the marginal revenue is equal to the marginal cost, it implies that profit remains unchanged. However, if the firm were to increase output from 5 to 6 units, where the marginal revenue is less than the marginal cost, then the additional unit would actually reduce profits. Therefore, the profit-maximizing output is the level where MR equals MC, which, according to the provided table, would be at an output of 5.