A profit-maximizing firm in the short run will expand output
A) until marginal cost begins to rise.
B) until total revenue equals total cost.
C) as long as marginal revenue is less than marginal cost.
D) as long as marginal revenue is greater than marginal cost.

Question

Quizplus · Accepted Answer

A profit-maximizing firm in the short run will continue to expand output as long as the marginal revenue is greater than the marginal cost. It is profitable as long as the extra revenue generated from producing an additional unit of output is greater than the extra cost incurred in producing that unit. The firm will stop expanding output when the MR=MC, as producing additional units would result in a decrease in profit.

A Profit-Maximizing Firm in the Short Run Will Expand Output