D) Marginal revenue equals the change in total revenue from selling one more uni

Question

D) Marginal revenue equals the change in total revenue from selling one more unit. 4. If, for a perfectly competitive firm, price exeeeds the marginal cost of production, the firm should A) increase its output. B) reduce its output C) keep output constant and enjoy the above normal profit. D) lower the price. 5. Producing where marginal revenue equals marginal cost is equivalent to producing where A) average total cost equals average revenue. B) average fixed cost is minimized C) total revenue is equal to total cost. D) total profit is maximized 6. If a perfectly competitive firm's price is above its average total cost, the firm A) is earning a profit. B) should shut down. C) is incurring a loss. D) is breaking even

Explanation / Answer

Ans)
4.
A) increase its output
If the price exceeds MC then that means that the MR also exceeds MC, for the two to be equal the output must be increased.
5.
D) total profit is maximized
MC=MR is the profit maximization rule, thus where the two are equal the total profit would be the maximum.
6.
A) is earning a profit
If P>ATC then the firm is earning a profit since the total revenues would exceed the total costs.

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