Question 41
MediumOriginal questionMatch each situation with what the firm should do.
| List I | List II |
|---|---|
| A. MR > MC | I. Stay: equilibrium |
| B. MR < MC | II. Produce more |
| C. MR = MC, MC rising | III. Keep expanding: not the equilibrium |
| D. MR = MC, MC falling | IV. Produce less |
Show the answer and explanation
CorrectNot quiteAnswer A
Correct answer: A
Explanation
MR > MC: the next unit adds profit; MR < MC: the last unit loses money.
MR = MC with rising MC is the equilibrium; with falling MC, more output still pays.
- Concept
- MR, MC and decisions
- Typical timeTypical
- 90 s
- Your timeYours
- —
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