-In Exhibit I-3, a firm is currently producing 45 units. What would you advise this firm to do?
A) shut down
B) increase quantity
C) stay at 45 units
D) decrease quantity
E) decrease price

Question

-In Exhibit I-3, a firm is currently producing 45 units. What would you advise this firm to do?
A) shut down 
B) increase quantity 
C) stay at 45 units 
D) decrease quantity 
E) decrease price

Quizplus · Accepted Answer

To provide accurate advice, one would need to analyze the firm's marginal costs, marginal revenues, fixed costs, and the market demand at the current production level. Without specific data, a general recommendation for a firm, assuming it is not covering its variable costs, would be to adjust its production to where marginal cost equals marginal revenue for profit maximization. If the firm is covering its variable costs but not its total costs, it might still be beneficial to continue producing in the short run. Increasing quantity could be advised if it leads to higher revenues that exceed the additional costs of production.

-In Exhibit I-3, a Firm Is Currently Producing 45 Units