Assume a firm wishes to maximize profits (or minimize losses). If the firm is pr

Question

Assume a firm wishes to maximize profits (or minimize losses). If the firm is producing an output level in which:
a.) marginal revenue exceeds marginal cost then it should increase its output level to increase profits (or reduce losses).
b.) marginal revenue is less than marginal cost then it should increase its output level to increase profits (or reduce losses).
c.) marginal cost is at a minimum then it is producing the profit-maximizing (loss-minimizing) output level.
d.) All of the above

Explanation / Answer

Just A. If MR > MC, then increase the output level until MR = MC, where profit is maximized. The other choices do not maximize profits.

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