A competitive firm currently produces and sells 500 units of output. Its total revenue is $3,500; the marginal cost of producing the 500th unit of output is $5.75; and the average total cost of producing the 500th unit of output is $4.00 . 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 = $7 . Since marginal revenue exceeds marginal cost, the firm should increase its output in order to increase its profit.
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The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage:
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