If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should
A)shut down.
B)reduce its output but continue operating.
C)continue to produce at the current levels.
D)increase its output.

Question

Quizplus · Accepted Answer

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should increase its output. By increasing its output, the marginal cost will increase, which will eventually lead to the marginal cost being equal to the price. At this point, the firm will be producing at the profit-maximizing level.

If a Profit-Maximizing Firm in a Competitive Market Discovers That