Question

If marginal cost for a firm exceeds marginal revenue, what can be said about the firm? Select one: O a. It should increase the level of production to maximize its profit. O b. It must be experiencing losses. O c. It is most likely to be at a profit-maximizing level of output. O d. It may still be earning a profit.

Answer 1

b. It must be experiencing losses

Explanation

Firm should increase output as long as marginal revenue exceeds marginal cost.
In order to maximise profit, firm should follow the marginal condition(marginal cost equals marginal revenue ).
If a firm's marginal cost is greater than marginal revenue, the firm is losing profit with each additional units of output and it is better to produce less.
The shutdown of firm occurs when marginal revenue is less than average variable cost.