A firm is currently producing at an output level at which marginal revenue is $5 and marginal cost is $4, the firm should:
A) increase its production until marginal cost is $5
B) increase its price to $5
C) decrease its price to $4
D) decrease its production until marginal revenue is $4

Question

Quizplus · Accepted Answer

The firm should increase its production until marginal cost equals marginal revenue, which maximizes profit. Since marginal revenue ($5) is greater than marginal cost ($4), increasing production will increase profit.

A Firm Is Currently Producing at an Output Level at Which