TABLE 9-2

-Refer to Table 9-2. If the firm is currently producing 12 units of output, what should the firm do to maximize profits?
A) Reduce output to 11 units.
B) Increase output beyond 12 units.
C) Maintain the current output level.
D) Reduce output to 10 units.

Question

TABLE 9-2
 
-Refer to Table 9-2. If the firm is currently producing 12 units of output, what should the firm do to maximize profits?
A) Reduce output to 11 units. 
B) Increase output beyond 12 units. 
C) Maintain the current output level. 
D) Reduce output to 10 units.

Quizplus · Accepted Answer

To maximize profits, a firm should produce at the level where marginal cost (MC) equals marginal revenue (MR). Without the specific data from Table 9-2, the general principle is that if producing one more unit (going from 12 to 13) would increase costs more than revenue, the firm should not increase output. If the cost of producing the 12th unit is higher than the revenue it generates, reducing output would increase profits until MC equals MR. Since the question suggests a change in output is needed for profit maximization and option A is the closest to this principle without additional data, it is chosen as the correct action.

TABLE 9-2 -Refer to Table 9-2. If the Firm Is Currently Producing