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Suppose a firm is producing a level of output such that MR > MC. What should be firm do to maximize its profits?
- a)The firm should do nothing.
- b)The firm should hire less labour.
- c)The firm should increase price.
- d)The firm should increase output.
Correct answer is option 'D'. Can you explain this answer?
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Suppose a firm is producing a level of output such that MR MC. What s...
Maximizing Profits when MR=MC
When a firm is producing a level of output such that MR=MC, it means that the marginal revenue earned from producing an additional unit of output is equal to the marginal cost of producing that additional unit. In such a scenario, the firm is maximizing its profits.
Increasing Output
To maximize its profits, the firm should increase its output. This is because producing an additional unit of output will add more to the firm's revenue than it will add to its costs. As long as the price that the firm is charging is greater than its marginal cost, the firm will earn additional profits by producing more.
Hiring Less Labour
Hiring less labour will not help the firm maximize its profits in this scenario. This is because labour is just one of the many factors of production that the firm uses to produce its output. If the firm is already producing at a level where MR=MC, reducing labour will only reduce the firm's output, and hence its revenue, without reducing its costs significantly. As a result, the firm's profits will decline.
Increasing Price
Increasing the price that the firm charges for its output will not help it maximize its profits in this scenario. This is because the firm is already producing at a level where MR=MC. If the firm increases its price, it will sell fewer units of output, which will reduce its revenue. Moreover, the marginal revenue earned from selling an additional unit of output will also decline, as the higher price will discourage some buyers from purchasing the firm's product.
Conclusion
To maximize its profits when MR=MC, the firm should increase its output. Hiring less labour or increasing the price that it charges for its output will not help it maximize its profits in this scenario.
When a firm is producing a level of output such that MR=MC, it means that the marginal revenue earned from producing an additional unit of output is equal to the marginal cost of producing that additional unit. In such a scenario, the firm is maximizing its profits.
Increasing Output
To maximize its profits, the firm should increase its output. This is because producing an additional unit of output will add more to the firm's revenue than it will add to its costs. As long as the price that the firm is charging is greater than its marginal cost, the firm will earn additional profits by producing more.
Hiring Less Labour
Hiring less labour will not help the firm maximize its profits in this scenario. This is because labour is just one of the many factors of production that the firm uses to produce its output. If the firm is already producing at a level where MR=MC, reducing labour will only reduce the firm's output, and hence its revenue, without reducing its costs significantly. As a result, the firm's profits will decline.
Increasing Price
Increasing the price that the firm charges for its output will not help it maximize its profits in this scenario. This is because the firm is already producing at a level where MR=MC. If the firm increases its price, it will sell fewer units of output, which will reduce its revenue. Moreover, the marginal revenue earned from selling an additional unit of output will also decline, as the higher price will discourage some buyers from purchasing the firm's product.
Conclusion
To maximize its profits when MR=MC, the firm should increase its output. Hiring less labour or increasing the price that it charges for its output will not help it maximize its profits in this scenario.
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Suppose a firm is producing a level of output such that MR MC. What s...
Profit maximizing condition is MR=MC.If a firm is producing at MR>MC, then the condition MR=MC will be satisfied only when the output is increased
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Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer?
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Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer?.
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Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer?, a detailed solution for Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of Suppose a firm is producing a level of output such that MR MC. What should be firm do to maximize its profits?a)The firm should do nothing.b)The firm should hire less labour.c)The firm should increase price.d)The firm should increase output.Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
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