If MR > MC, output should a. expand. b. contract. c. remain constant. d. expand or...

If MR > MC, output should

	a.	expand.
	b.	contract.
	c.	remain constant.
	d.	expand or contract depending on whether P > AC.

Solutions

Expert Solution

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MR is the addition to total revenue from sale of one more unit of output and MC is the addition to TC for increasing production by one unit. Every producer aims to maximize the total profits. For this a firm compares it's MR with MC. Profit will increase as long as MR>MC as it is possible to add to profits by expanding production. A firm will be at equilibrium when MR = MC.

Rahul Sunny answered 1 year ago

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