If a firm is earning a profit and is operating at the output level where its marginal revenue exceeds its marginal cost by the greatest amount, the firm:
A) is maximizing its profit at that output level.
B) could increase its profit by increasing its output level.
C) could increase its profit by decreasing its output level.
D) is operating at the output level where total revenue equals total cost.

Question

Quizplus · Accepted Answer

To maximize profits, a firm should produce at the level where marginal revenue (MR) equals marginal cost (MC). If MR exceeds MC, the firm can increase profit by producing more, as the revenue from selling additional units will be greater than the cost of producing those units.

If a Firm Is Earning a Profit and Is Operating