If a Firm Decreases Output When MR > MC, Then

question 146

Multiple Choice

If a firm decreases output when MR > MC, then:

• A) profit will equal zero.
• B) profit will increase.
• C) profit will decrease.
• D) profit will remain the same.
• E) the firm is minimizing losses.

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Definitions:

Moral Hazard

A situation where one party is more likely to take risks because another party bears the consequences of those risks.

Alter Behavior

The process of changing or modifying actions, habits, or conduct.

Production Subsidies

Financial support given by the government to producers or manufacturers to help reduce the cost of producing goods or services.

External Costs

These are costs of a transaction that affect someone who did not choose to incur that cost, often not reflected in the market prices.