Question

For a perfectly competitive​ firm, when MC is less than​ MR, A. economic profits must be...

For a perfectly competitive​ firm, when MC is less than​ MR,

A.

economic profits must be positive.

B.

the producer has an incentive to decrease output.

C.

the producer has an incentive to expand output.

D.

the producer has no incentive to change production

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Answer #1

Answer : The answer is option C.

For perfectly competitive firm the profit maximizing condition is MR = MC. If production level increase then MC increase. Now if MC is less than MR then to reach at profit maximizing condition the producer will increase the production level. Hence except option C other options are not correct. Therefore, option C is the correct answer.

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