A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its
A)marginal revenue is lower than it was previously.
B)marginal cost is lower than it was previously.
C)quantity of output is higher than it was previously.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

When the price rises, the firm will increase its output to maximize profit, leading to a higher quantity of output. Marginal cost will adjust to equal the new marginal revenue, which is now $14, not lower.

A Competitive Firm Has Been Selling Its Output for $10