If a firm is producing where marginal revenue is less than marginal cost, the firm should increase its level of output to increase profits.

Question

Quizplus · Accepted Answer

If a firm is producing where marginal revenue is less than marginal cost, it means that the cost of producing one additional unit of output is higher than the revenue earned from selling that unit. Therefore, the firm would actually be losing money by increasing its level of output. To maximize profits, the firm should reduce its level of output until marginal revenue equals marginal cost.

If a Firm Is Producing Where Marginal Revenue Is Less