Answer to Question #227564 in Economics for Sandrine Mayombo

Question

If a perfectly competitive firm’s marginal cost is greater than its marginal revenue at its current level of production, what must the firm do to increase its profit?

A. Increase its output.

B. Decrease its output.

C. Increase the price of its product.

D. Reduce the price of its product.

Answer 1

If a perfectly competitive firm’s marginal cost is greater than its marginal revenue at its current level of production, then the firm must decrease production to increase and maximize its profit, until MR = MC.

So, the correct answer is B.