A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Question

Quizplus · Accepted Answer

In a competitive market, a profit-maximizing firm will increase production as long as the additional revenue from selling one more unit (average revenue) exceeds the additional cost of producing that unit (marginal cost), because doing so increases the firm's profit.

A Profit-Maximizing Firm in a Competitive Market Will Increase Production