Which of the following statements best expresses a firm's profit-maximizing decision rule?
A)If marginal revenue is greater than marginal cost, the firm should increase its output.
B)If marginal revenue is less than marginal cost, the firm should decrease its output.
C)If marginal revenue equals marginal cost, the firm should continue producing its current level of output.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The profit-maximizing decision rule for a firm is to produce where marginal revenue equals marginal cost. Therefore, option C is correct. If marginal revenue is greater than marginal cost, the firm should increase its output until the two are equal, so option A is also correct. If marginal revenue is less than marginal cost, the firm should decrease its output until the two are equal, so option B is also correct. Therefore, option D, "All of the above are correct," is the best choice.

Which of the Following Statements Best Expresses a Firm's Profit-Maximizing