Question Completion Status: Table 14-9 Suppose that a firm in a competitive mark

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Question Completion Status: Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: Quantity 0 Total Revenue $0 $9 $18 $27 $36 $45 $54 $63 $72 $81 Total Cost $10 $14 $19 $25 $32 $40 $49 $59 $70 $82 3 4 5 6 8 9 Refer to Table 14-9. If the firm's marginal cost is $5, it should 0 a. increase production to maximize profit. O b. decrease production to maximize profit. c. maintain its current level of production to maximize profit d reduce fixed costs by lowering production. Click Save and Submit to save and submit. Click Save All Anstwers to save all anstwers

Explanation / Answer

Correct option: (a) increase production

Reason: In order to maximize production, the firm must sell at the point P = MR = MC

As it can be seen, P = MR = 9

Thus if MC is 5 < MR, then production needs to be increased till the point MC increases to $9 and profits get maximized.

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