Firms that face capacity constraints can increase output only up to the capacity,but no further.Therefore,firms A)Should price to capacity as long as MR MC B)Should price to capacity as long as MR = MC C)Should price to capacity as long as MR

Question

Firms that face capacity constraints can increase output only up to the capacity,but no further.Therefore,firms​
A)​Should price to capacity as long as MR > MC
B)Should price to capacity as long as MR = MC
C)Should price to capacity as long as MR < MC
D)​Should not take capacity into consideration in pricing decisions

Quizplus · Accepted Answer

Firms facing capacity constraints cannot increase output further beyond their capacity limit. Therefore, they should price their products at the highest level possible as long as marginal revenue (MR) is greater than marginal cost (MC). This ensures that the firm maximizes its profits within its capacity limitations. So, the best choice is A.

Firms That Face Capacity Constraints Can Increase Output Only Up