If a Perfectly Competitive Firm Is Producing 2,500 Units And

question 112

Multiple Choice

If a perfectly competitive firm is producing 2,500 units and, at the 2,500th unit, the difference between marginal revenue and marginal cost (MR - MC) is positive, which of the following is true?

• A)The firm should increase production to maximize profit.
• B)The firm is maximizing profit.
• C)The firm should decrease production to maximize profit.
• D)The 2,500th unit costs more to produce than the firm earns in revenue.

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Definitions:

Support Department Allocations

The process of distributing overhead costs from support or service departments to producing or operating departments based on their usage of those services.

Operating Income

Earnings before interest and taxes (EBIT), indicating the profitability from regular business operations.

Profit Center Manager

An individual responsible for managing a segment or division of a business that is treated as its own unit for the purpose of calculating its profitability.

Operating Income

A measure of a company's profitability from its core business functions, excluding non-operating income and expenses.