A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Question

Quizplus · Accepted Answer

The firm should not produce the 100th unit because it costs more to produce ($5) than it can be sold for ($4.75), meaning the firm would lose money on producing that unit. Producing one less unit would increase overall profit or decrease losses.

A Firm Is Currently Producing 100 Units of Output Per