If the competitive firm suddenly notices that price exceeds its marginal cost, it should: Select one:...
If the competitive firm suddenly notices that price exceeds its marginal cost, it should: Select one: a. shut down. b. decrease output. c. raise its price. d. increase output.
Homework Answers
Answer
Option d
d. increase output
The firm produces at P=MC
where
P is a horizontal line as the firm is a price taker
MC is upward sloping
So, the P>MC then the firm should increase output to produce at MC=P which is the profit-maximizing level of output.
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