Asked by Susan

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?
Answered by drwls
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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