Final answer:
The statement is false; reducing sales will not increase profits if marginal revenue is larger than marginal cost. The optimum profit condition is achieved when MR equals MC, and reducing output to this point, not sales, maximizes profits.
Step-by-step explanation:
The assertion that reducing sales will increase profits if marginal revenue is larger than marginal cost is false. The optimal point of production for profit maximization occurs when marginal revenue (MR) equals marginal cost (MC).
If a firm is producing a quantity where marginal costs exceed marginal revenue, then every additional unit produced is contributing less to revenue than it costs to make, therefore reducing profits.
Profits would be greatest when a firm reduces output to the point where MR equals MC. Should marginal costs be higher than the marginal revenue, the firm can increase its profits by reducing the quantity of production until these two values are equal. It is at this equilibrium point that the firm's profits are maximized, as any additional unit would impose more cost than the revenue it generates.