Suppose,at its current output level,a firm's marginal profit is positive.Therefore,to maximize profit,it should:
A)decrease output until marginal profit is zero.
B)increase output because marginal revenue [MR] is less than marginal cost [MC].
C)increase both its output and its price.
D)increase output because MR is greater than MC.
E)increase output until it is producing at full capacity.

Question

Quizplus · Accepted Answer

The firm's marginal profit is positive, meaning that its marginal revenue (MR) is greater than its marginal cost (MC). In order to maximize profit, the firm should continue to increase output until the point where MR=MC. At this point, the firm is producing at the optimal level where the additional revenue from producing one more unit (MR) is equal to the additional cost of producing that unit (MC). Therefore, choice D is the best option.

Suppose,at Its Current Output Level,a Firm's Marginal Profit Is Positive