-Assume that the firm in this figure is operating at a profit. As this firm increases its level of output from 200 to 300 units, its profit will:
A) increase.
B) decrease.
C) remain unchanged.
D) increase at first, and then decrease.

Question

-Assume that the firm in this figure is operating at a profit. As this firm increases its level of output from 200 to 300 units, its profit will:
A) increase. 
B) decrease. 
C) remain unchanged. 
D) increase at first, and then decrease.

Quizplus · Accepted Answer

When a firm is operating at a profit and decides to increase its level of output, its profit will increase as long as the price per unit exceeds the marginal cost of producing each additional unit. Since the specific details about costs and prices are not provided, the general principle in profit-maximizing behavior is that if the firm is already profitable, increasing output can lead to higher profits, assuming the market can absorb the additional units without forcing a decrease in selling price or incurring disproportionately higher costs.

-Assume That the Firm in This Figure Is Operating at a Profit