ECONOMICS (CBSE/UGC NET)

ECONOMICS

PROFIT

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
* If marginal revenue (MR) is less than marginal cost (MC) at a particular level of output, the firm should decrease output. This is because it’s costing the firm more to produce its last unit of output than it receives in revenue. So decreasing output adds to profit.
A
Yes, I understand this from the notes
B
No, I don’t understand this from the notes
C
No, I don’t understand this, as I have not read the notes
D
None of the above
Explanation: 

Detailed explanation-1: -When marginal revenue is less than the marginal cost of production, a company is producing too much and should decrease its quantity supplied until marginal revenue equals the marginal cost of production.

Detailed explanation-2: -If MR is above its MC of production, then the marginal benefit of the output is above the marginal cost so, the profit of the firm can be increased by increasing the production of output. Whereas, if MR is less than MC, then the profit rises by reducing the output and thus, reducing the MC.

Detailed explanation-3: -If marginal revenue is greater than marginal cost, a producer must reduce the level of output to maximize profit. This statement is b. False. A firm maximizes revenue when the level of marginal revenue is equal to marginal cost.

Detailed explanation-4: -If marginal cost is greater than marginal revenue, the firm can increase its profit by decreasing output. c. At the profit-maximizing level of output, marginal revenue is equal to marginal cost. 1.

There is 1 question to complete.