If, for the last unit of a good produced by a perfectly competitive firm, MR MC, then in producing it, the firm
A)added more to total costs than it added to total revenue.
B)added more to total revenue than it added to total cost.
C)is maximising marginal profit.
D)has minimised its losses.

Question

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm
A)added more to total costs than it added to total revenue.
B)added more to total revenue than it added to total cost.
C)is maximising marginal profit.
D)has minimised its losses.

Quizplus · Accepted Answer

When the marginal revenue (MR) is greater than the marginal cost (MC), the last unit of production adds more to the total revenue than to the total cost. Thus, producing the last unit increases the total profit. Therefore, the firm should produce the last unit as long as MR > MC, and in doing so, it will add more to total revenue than it adds to total cost.

If, for the Last Unit of a Good Produced by a Perfectly