If marginal revenue is less than marginal cost at every level of output,a profit-maximizing firm should:
A) produce when the difference between marginal revenue and marginal cost is greatest.
B) produce when total revenue is maximized.
C) produce when the difference between total revenue and marginal cost is maximized.
D) produce when the difference between average revenue and average cost is equal to 1.
E) not produce any output.

Question

Quizplus · Accepted Answer

When marginal revenue is less than marginal cost at every level of output, it means that each additional unit produced will actually cost the firm more than it will bring in revenue. In this case, producing any output would lead to a loss for the firm. Therefore, the best option for a profit-maximizing firm in this scenario would be to not produce any output.

If Marginal Revenue Is Less Than Marginal Cost at Every