-In Exhibit I-6 (on the previous page), the price is fixed at $35. The firm is producing where MR = MC. What do you advise this firm to do in the short run?
A) Shut down.
B) Increase output.
C) Decrease output.
D) Stay at its current output.
E) Decrease price.

Question

-In Exhibit I-6 (on the previous page), the price is fixed at $35. The firm is producing where MR = MC. What do you advise this firm to do in the short run?
A) Shut down. 
B) Increase output. 
C) Decrease output. 
D) Stay at its current output. 
E) Decrease price.

Quizplus · Accepted Answer

If a firm is producing where marginal revenue (MR) equals marginal cost (MC) and the price is fixed at a level above variable costs, it is maximizing its profits or minimizing its losses in the short run. Therefore, the best advice is to stay at its current output.

-In Exhibit I-6 (On the Previous Page), the Price Is