When marginal cost is greater than marginal revenue, then a profit-maximizing firm must
A)increase output.
B)hold output constant.
C)decrease output.
D)stop production.
E)reduce the price it charges.

Question

Quizplus · Accepted Answer

When marginal cost is greater than marginal revenue, the firm is facing diminishing returns and producing additional units of output is becoming increasingly expensive. In order to maximize profits, the firm should decrease output until marginal cost equals marginal revenue.

When Marginal Cost Is Greater Than Marginal Revenue, Then a Profit-Maximizing