Why will a profit-maximizing firm never choose to produce at a quantity where marginal cost exceeds marginal revenue?

a. Draw the marginal cost/marginal revenue graph and use it to help you explain.

b. Which two lines on a cost curve diagram intersect at the zero-profit point?

Expert Solution

a) The reason is that the marginal revenue exceeds the marginal cost.

Additional profit means adding more profit than its actual price.

FMC is greater than r then profits can be increased by reducing the outputs produced.

This is known as profit maximization under perfectly competitive market.

b) The two points that intersects the zero-profit point is the average cost curve in marginal revenue curve.

If the average cost curve is below the marginal revenue curve then the firm is set to make profits at the selected level of output.

The four year the average cost curve and the marginal revenue curve intersect each other.

Rahul Sunny answered 2 years ago

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost,...

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same? Why? What is the profit-maximizing quantity for any firm to produce?

1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue,...

1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue, then ________. (there can be multiple answers.) A)the firm should reduce production B)each marginal unit adds profit by bringing in more revenue than its cost C)the firm's perceived demand will shift to the left D)the excess profit would attract additional competition 2.In what way(s) is a monopolistically competitive firm inefficient?(there can be multiple answers.) A) It does not produce at the minimum of its...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist...

A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. true or false Price discrimination is a rational strategy for a profit-maximizing monopolist when there is no opportunity for customers to engage in arbitrage across market segmentations true or false When regulating a monopoly with average cost pricing, the monopoly is able to enjoy a zero economic profit and the deadweight loss of...

a. If the marginal revenue is less than the marginal cost, what should a profit-maximizing company...

a. If the marginal revenue is less than the marginal cost, what should a profit-maximizing company do? b. In a perfectly competitive graph, how does one calculate the economic profit? c. What is the shutdown point in a perfectly competitive firm? ' d. Briefly, what is the difference between economies of scale and diseconomies of scale? Why is it important to the firm? e. Given the following total cost function TC(q) = 1000 + 13q. Find the fixed cost, variable...

If marginal cost exceeds marginal revenue, the firm A)should reduce its average fixed cost in order...

If marginal cost exceeds marginal revenue, the firm A)should reduce its average fixed cost in order to lower its marginal cost. B)may still be earning a positive accounting profit C)should increase the level of production to maximize its profit. D)is most likely to be at a profit-maximizing level of output. Who is a price taker in a competitive market? A)both buyers and sellers B)buyers only C)sellers only D)neither buyers nor sellers For a competitive firm, A)total cost equals marginal revenue....

QUESTION 12 Assume that a firm's marginal revenue barely exceeds marginal cost. To maximize profit, teh...

QUESTION 12 Assume that a firm's marginal revenue barely exceeds marginal cost. To maximize profit, teh firm should: expand output. contract output. maintain output. there is insufficient information to answer the question. QUESTION 13 In the short run, a perfectly competitive firm will stay in business as long as: Price equals average revenue. marginal revenue is greater than marginal cost. price exceeds average variable cost. price is less than average variable cost. QUESTION 14 Suppose that price is below the...

A profit-maximizing firm should keep on hiring labor as long as the marginal revenue product of...

A profit-maximizing firm should keep on hiring labor as long as the marginal revenue product of labor is greater than the wage. True or False

A. Why is the equality of marginal revenue and marginal cost essential for profit maximization in...

A. Why is the equality of marginal revenue and marginal cost essential for profit maximization in all market structures? B. Explain why price can be substituted for marginal revenue in the MR=MC rule when an industry is purely competitive

Question