In which of the following situations should a profit-maximizing firm leave its output unaltered? A) MR MC and Price Average total cost B) MR = MC and Total revenue

Question

In which of the following situations should a profit-maximizing firm leave its output unaltered? A) MR > MC and Price > Average total cost B) MR = MC and Total revenue < Total variable cost C) MR < MC and Price < Average total cost D) MR = MC and Total revenue > Total variable cost

Quizplus · Accepted Answer

When MR is equal to MC and total revenue is greater than total variable cost, the firm is already maximizing its profit. Changing the output level in this situation would either cause a decrease in profit if the output is increased or fail to increase profit if the output is decreased. Therefore, the firm should leave its output unaltered in this situation.

In Which of the Following Situations Should a Profit-Maximizing Firm