When choosing the production level for tomorrow you find that at an output of 100 units, the total variable costs are R20,000 and the average fixed cost is only R50. If the market price is R200, you should:
b or e.
shut down.
produce more than 100 units.
produce fewer than 100 units.
produce where MC = MR.
The correct answer is: produce where MC = MR.
When MC (Marginal Cost) equals MR (Marginal Revenue), the firm is maximizing profits. Producing more or less than the quantity where MC = MR would result in lower profits.