When a competitive firm finds that its marginal revenue is greater than its marginal cost at the current output, what action should it take to maximize profit?

Multiple choice question for Costs , Supply And Perfect Competition. Select an option, then review the explanation below.

Explanation

If marginal revenue exceeds marginal cost, producing additional units adds more to revenue than to cost, so increasing output will boost profits. Therefore, the firm should increase production.

Practice related questions from the same subject.

1.In the context of a perfectly competitive firm, what represents its short-run supply curve and its long-run supply curve respectively?
2.Under what condition will a firm cease production and produce nothing in the short term?
3.In the short run, the average total cost is composed of which two components?
4.What is the relationship between marginal cost and average cost when the average cost is decreasing and when it is increasing?
5.What does it indicate when the long-run average cost curve slopes downward from left to right?

When a competitive firm finds that its marginal revenue is greater than its marginal cost at the current output, what action should it take to maximize profit?

Explanation

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