BUSINESS ADMINISTRATION
MARKETING MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Detailed explanation-1: -Short‐run profit maximization. A firm maximizes its profits by choosing to supply the level of output where its marginal revenue equals its marginal cost. When marginal revenue exceeds marginal cost, the firm can earn greater profits by increasing its output.
Detailed explanation-2: -To maximize profits, the firm should set marginal revenue equal to marginal cost. Given the fact that this firm is operating in a competitive market, the market price it faces is equal to marginal revenue. Thus, the firm should set the market price equal to marginal cost to maximize its profits: 9 = 3 + 2q, or q = 3.
Detailed explanation-3: -To maximize short run profits, the firm selects a level of output where marginal revenue, MR, equals short-run marginal cost. “A competitive firm produces a quantity where price equals short-run marginal cost, and marginal cost is rising.”