If a business firm is not operating at the point where MR = MC, then:
A) it should shut down.
B) it will incur losses.
C) it cannot be earning a profit.
D) its profit is zero.
E) it is not earning the maximum potential profit.

Question

Quizplus · Accepted Answer

If a business firm is not operating at the point where MR = MC, it means that it is not producing the quantity where its marginal revenue is equal to its marginal cost, which is the point of profit maximization. This implies that the firm could increase its profits by adjusting its production level to the point where MR = MC. Therefore, the firm is not earning the maximum potential profit.

If a Business Firm Is Not Operating at the Point