Question

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then A. the firm is earning a positive profit. B. average revenue exceeds marginal cost. C. decreasing output would increase the firm's profit. D. All of the above are correct.

Answer 1

Answer:

C. decreasing output would increase the firm's profit.

Explanation:

The marginal concept explain the benefit or the cost that a company or firm gets of produce and additional unit of their product. In this case the marginal costs exceeds the marginal revenue, It means that the actual level of revenue isn't producing the optimum profit that could reach if the company decrease the output, for example

Marginal Cost= $1.20

Marginal revenue =$1

Difference = $1 - $1.20

= -$0.20

It means that the revenue of the firm increase but not at the same level that the marginal cost, that in this case is higher, it means that every additional unit affects negative the profitability of the company.