Question

How can producers make the most profit? Check all that apply.

They can work to increase their marginal cost.
They can work to decrease their marginal cost.
They can raise prices to increase marginal revenue.
They can lower prices to decrease marginal revenue.
They can keep marginal costs below marginal revenues.
They can keep marginal revenues below marginal costs.
Mark this and return

Answer 1

Correct choices:
- They can work to decrease their marginal cost.
- They can raise prices to increase marginal revenue.
- They can keep marginal costs below marginal revenues.

Brief why:
- Lowering marginal cost raises profit per unit and lets the profit-maximizing output (where MR = MC) be more profitable.
- Raising price increases marginal revenue for a firm with some pricing power (not for a perfect competitor), which can increase profit.
- Producers should expand output while MR > MC (i.e., keep MC below MR for the marginal unit) and stop when MR = MC; having MR < MC reduces profit.