Suppose that Krieger\'s Robots is currently producing 100 units of output. The s

Question

Suppose that Krieger's Robots is currently producing 100 units of output. The slope of his total venue curve is a constant, +10. At 100 units of production, the slope of his total cost curve is +15. Which of the following is likely to be true? tal a. Producing 100 units of output maximizes Krieger's revenues. b. Producing 100 units of output maximizes Kriegers profits. c. Given increasing marginal costs, Krieger would make higher profits by producing more than 100 units. Given increasing marginal costs, Krieger would make higher profits by producing less than 100 units. Given increasing marginal costs, producing 100 units minimizes Krieger's total cost. d. e.

Explanation / Answer

Ans: Given increasing marginal costs, Krieger would make higher profits by producing less than 100 units.

Explanation:

The slope of total revenue curve is called marginal revenue. So, here MR = 10

The slope of total cost curve is called marginal cost. So, here MC = 15

The firm will maximize profit at the point where MR = MC. Since , currently MC > MR, the firm has to Produce less output than 100 units to maximize profit.

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