Question

QUESTION 49 A firm is currently producing where MC-55 and MR-$10. This firm is profit-maximizing under-producing over-producing no conclusion can be made QUESTION 50 2 poin A firm should increase its production when marginal revenue rises and marginal cost stays the same marginal cost rises and marginal revenue stays the same both marginal cost and marginal revenue are falling both marginal cost and marginal revenue are rising

Answer 1

49. A firm maximizes its profit where the marginal cost equals the marginal revenue , here the marginal cost is less than the marginal revenue which means the firm is producing too little, to maximize the profits the firm has to increase the production so the marginal cost will increase and equals the marginal revenue.

Ans: Under producing.

50. As previously mentioned, the firm should increase the production if the marginal cost is less than the marginal revenue. On the other hand, if the marginal revenue is less than the marginal cost the firm should decrease the production, the optimal is where the marginal cost equals the marginal revenue.

Ans: Marginal revenue increases and the marginal costs stays the same.

46. The average product of labour is total product divided by the quantity produced.

APL =TP/Q

  

= 120/12

   $=10$ .

47. In the short run the firm is unable to vary all its factors of production, there must be at lest one fixed factor. Normally the labour is the variable factor and the capital is held constant. In the short run the firm can change the number of workers and not the plant size.