Homework Help: Microeconomics

Posted by Susan on Saturday, May 30, 2009 at 7:28pm.

If Marginal revenue exceeds marginal cost, a price-taker firm should
A. expand output
b reduce output
c lower its prices
d. do both a and c

I believe the answer "A" is this correct?

Microeconomics - drwls, Saturday, May 30, 2009 at 10:18pm
Yes, A. That will increase profit assuming no major new capital investment or overtime expenses are required to increase output. Since "marginal" implies a small change, it is unlikely that capital investment will be changed. Increased hiring may be justified to expand output.

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