Answer to Question #104415 in Microeconomics for Karabo

Question

Why would a firm increase the quantity of its output even though marginal cost is increasing?

Answer 1

Marginal cost is the change in total cost that occurs when the quantity produced is increased by one unit.In the short run ,a firm will continue producing up as long as the marginal revenue is more than the marginal cost which means that the firm is making profits from the increased production.This goes on until the marginal cost is equal to the marginal revenue.