Firms that face capacity constraints can only increase output only up to the capacity,but no further.Therefore,firms A)Should price to capacity as long as MR MC B)Should price to capacity as long as MR = MC C)Should price to capacity as long as MR

Question

Firms that face capacity constraints can only increase output only up to the capacity,but no further.Therefore,firms
A)Should price to capacity as long as MR > MC
B)Should price to capacity as long as MR = MC
C)Should price to capacity as long as MR < MC
D)Should not take capacity into consideration in pricing decisions

Quizplus · Accepted Answer

Firms that face capacity constraints cannot increase output beyond the capacity. Therefore, they should aim to price their products to capacity as long as the marginal revenue (MR) is greater than or equal to the marginal cost (MC) to maximize revenue and profit. In this case, choice A is the best answer as it suggests pricing to capacity as long as MR is greater than MC.

Firms That Face Capacity Constraints Can Only Increase Output Only