Question

Assume this firm is producing two units. which action should this firm take to maximize profits? produce one less unit. produce one more unit. produce two more units. produce three more units.

Answer 1

To maximize profits, the firm should produce more units if MR exceeds MC, and produce fewer if MC exceeds MR, aiming for MR to equal MC at the profit-maximizing quantity.

Step-by-step explanation:

The firm should assess its production levels based on the relationship between marginal cost (MC) and marginal revenue (MR). To maximize profits, if the firm is producing two units and faces a condition where the MR exceeds the MC, it should produce additional units until MR equals MC. If the MR is less than the MC, it should reduce production. Without specific MR and MC figures for the two units in question, it's not possible to provide a definitive action. The decision-making process involves choosing the output level where MR and MC are equal, as this point represents the profit-maximizing quantity.