At the level of output where marginal revenue equals marginal cost, price is les

Question

At the level of output where marginal revenue equals marginal cost, price is less than average total cost but greater than average variable cost. In this instance, a profit-maximizing firm should: Answer cease production as it is incurring an economic loss. continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs. continue operating at that output level in the short term, since total revenue will cover all of the firm's fixed costs and a portion of its variable costs. decrease output to where marginal revenue exceeds marginal cost by the greatest dollar amount. increase the production of output.

Explanation / Answer

Produce the quantity that equates MR and MC. Incur economic loss less than fixed cost.

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