At any quantity of output below the intersection of the marginal revenue and marginal cost curves:
A) ATC is lower than AVC.
B) MC is higher than MR.
C) MR is higher than MC.
D) the firm would lose profits producing the units.

Question

Quizplus · Accepted Answer

At any quantity of output below the intersection of the marginal revenue and marginal cost curves, the marginal revenue is higher than the marginal cost. Therefore, the firm can increase its profit by producing more. The statement (A) is not necessarily true as ATC may be higher than AVC for some output levels. The statement (B) is true, but it does not provide information about the profit situation. The statement (D) is not necessarily true as the firm can still cover its variable costs if the price is above the AVC.

At Any Quantity of Output Below the Intersection of the Marginal