If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then
A)a one-unit increase in output will increase the firm's profit.
B)a one-unit decrease in output will increase the firm's profit.
C)total revenue exceeds total cost.
D)total cost exceeds total revenue.

Question

Quizplus · Accepted Answer

If marginal revenue is greater than marginal cost, it means that the firm is gaining more revenue per unit than it is spending to produce that unit. Therefore, producing one more unit will increase profit since the additional revenue will exceed the additional cost.

If a Competitive Firm Is Currently Producing a Level of Output