Answer to Question #149840 in Microeconomics for Ahamd jalal khan

Question

A car manufacturing should continue to produce additional cars as long as the firm is profitable justify

Answer 1

when a competitive firm doubles the amount it sells,price remains same and the total revenue also doubles. As long as marginal profit is positive, producing more output will increase total profits. When marginal profit turns negative, producing more output will decrease total profits. Total profit is maximized where marginal revenue equals marginal cost. In this example, maximum profit occurs at 4 units of output.