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 cost

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 explanation:
- Profit is maximized when marginal revenue (MR) = marginal cost (MC). A firm can raise profit by lowering MC (cutting costs) or by raising MR (increasing price or shifting demand upward — this is possible only if the firm has some market power).
- If MC < MR, producing more will raise profit (so keeping MC below MR signals profitable expansion). If MR < MC, the firm should cut output.
- Increasing MC or keeping MR below MC would reduce profit. Lowering price typically reduces marginal revenue (and, unless it raises overall revenue enough, can reduce profit).