In the graph, between 1 and 5 units of output, MR is above MC. What does that mean for profit? A U-shaped MC curve, lowest at ₹12 at 3 units, and a horizontal MR = P line at ₹20. MC equals MR at A (1 unit), where MC is falling, and at B (5 units), where MC is rising.

In the graph, between 1 and 5 units of…

In the graph, between 1 and 5 units of output, MR is above MC.

Question 48

HardOriginal question

In the graph, between 1 and 5 units of output, MR is above MC. What does that mean for profit?

A U-shaped MC curve, lowest at ₹12 at 3 units, and a horizontal MR = P line at ₹20. MC equals MR at A (1 unit), where MC is falling, and at B (5 units), where MC is rising.

Each unit in this range lowers profitCorrect answerYour answerEach unit in this range adds to profit, so the firm should produce themCorrect answerYour answerProfit is at its maximum throughoutCorrect answerYour answerThe firm should shut downCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

Profit changes by MR − MC with each unit.
Positive MR − MC means each of these units raises profit, which is why the firm goes on to B.

Concept: MR above MC
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsProducer's equilibrium: MC = MR

Practise this chapter →

Ten questions from Revenue & Producer's Equilibrium, at your own pace.

Practise this chapter →

Ten questions from Revenue & Producer's Equilibrium, at your own pace.

In the graph, between 1 and 5 units of output, MR is above MC.

Question 48

Explanation