Question

Why won't producers overproduce their goods and services? Select one: a. They must create a shortage in order to maximize their profits. b. They must artificially inflate their prices by under-producing their goods and services. c. They must keep their marginal cost equal to their marginal revenue. d. They must keep their products in short supply to increase their prices. Clear my choice

Answer 1

Your answer is option C

Answer 2

They must keep their marginal cost equal to their marginal revenue

Step-by-step explanation:

The marginal cost of a product is the cost added by producing one additional product or service.

The marginal revenue is the additional revenue generated by increasing product or service sales by one unit.

Companies will do analysis of marginal cost to determine if the value of the product being produced is worth the marginal revenue gained by creating additional units of that good or service. You'll see this often with big companies that produce huge volumes of units, like nvidia creating graphics chips. They are attempting to maximize the profit while minimize the cost of production for their good or service.

Cheers.