Answer to Question #307794 in Microeconomics for lydia

Question

why should a firm increase its output when MR > MC and decrease its output when MR < MC? Explain

Answer 1

MR > MC means the marginal revenue is greater than the marginal cost. The firm's production at this output level can maximize profits.

MR < MC means the marginal cost is greater than the marginal revenue.  If the firm produces more in a given amount, MC > MR, the firm may make more money by lowering its output quantity.