If a Profit-Maximizing Firm Finds That,at Its Current Level of Production,MR

question 125

Multiple Choice

If a profit-maximizing firm finds that,at its current level of production,MR > MC,it will

• A) earn greater profits than if MR = MC.
• B) increase output.
• C) decrease output.
• D) shut down.

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Definitions:

Price Elasticity

measures how much the quantity demanded of a good changes in response to a change in the price of that good.

Absolute Value

The absolute value refers to a number's magnitude irrespective of its sign, essentially measuring how far away the number is from zero along the numerical line.

Complementary Good

A complementary good is a product or service that adds value to another product or service when both are used together, leading to an increase in demand for one when the price of the other decreases.

Inferior Good

An inferior good is one where demand decreases as the income of the consumer increases, opposed to a normal good where demand increases with an increase in income.