Verbally explain why a firm would maximize profits by producing output up to the point where MR = MC
At levels of output below the equilibrium, marginal revenue is typically greater than marginal cost. Thus,
the firm could add more to total revenue than it would add to total cost by producing an additional unit of
output. As a result, profits would rise. The opposite holds at output levels above equilibrium, in that
MR < MC. The reduction in total revenue from producing one less unit of output is less than the reduction
in total cost by producing one less unit of output, so profits would rise by reducing output.
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Which of the following weights on utility (over four periods starting with the current one) provide an illustration of hyperbolic discounting that could well lead to inconsistent choices over time?
a. 1, .5, .25, .125. b. 1, .25, .0625, .015625. c. 1, .8, .72, .648. d. 1, 1, 1, 1.
If the Fed increases its open market purchases of government securities, it exerts a downward pressure on the interest rate. Such a phenomenon is usually referred to as the ___________________ effect
A) income B) substitution C) open market D) liquidity E) expectations
Advertising is likely to
A. shift the firm's average total cost curve upward and make demand more elastic. B. shift the firm's average total cost curve downward and make demand more elastic. C. shift the firm's average total cost curve upward and make demand more inelastic. D. shift the firm's average total cost curve downward and make demand more inelastic.
According to Keynes, if the economy is in a deep recession, an increase in aggregate demand will
A. increase real GDP without putting significant upward pressure on the price level. B. decrease real GDP. C. increase the price level with no effect on real GDP. D. increase both real GDP and the price level.