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

Question

Quizplus · Accepted Answer

In a competitive market, a profit-maximizing firm will decrease production when the marginal cost (MC) exceeds the average revenue (AR), because producing additional units would result in a loss on those units, as the cost of producing them is higher than the revenue they would generate.

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