A competitive firm currently produces and sells 500 units of output. Its total revenue is $6,000; the marginal cost of producing the 500th unit of output is $14.50; and the average total cost of producing the 500th unit of output is $9.50 . Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?
For this firm, price = marginal revenue = $12 . Since marginal cost exceeds marginal revenue, the firm should decrease its output in order to increase its profit.
You might also like to view...
The Rule of 70 can be used to calculate the
A) 70 percent level of the economic growth rate. B) population growth rate per year. C) economic growth rate per year. D) economic growth rate per month. E) number of years it would take for the level of any variable to double.
Marginal utility theory is used in the derivation of the
A) negative slope of demand curves. B) negative slope of supply curves. C) positive slope of demand curves. D) positive slope of supply curves.
A government policy that would raise the rate of productivity growth is
A) shifting infrastructure expenditures to the private sector. B) taxing expenditures on research and development. C) reducing the government budget surplus. D) improving human capital development.
Real wages usually lag behind the increases in labor productivity
a. True b. False Indicate whether the statement is true or false