Question

How can producers maximize their 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.

Answer 1

Correct answers:
- They can work to decrease their marginal cost.
- They can raise prices to increase marginal revenue (only if they have market power).

Explanation:
Profit is maximized where marginal revenue (MR) = marginal cost (MC). So firms can raise profit by either lowering MC (shift MC down) or raising MR (shift MR up). Raising price can raise MR only for a firm with some market power (a monopolist or imperfect competitor); price‑taking firms cannot change MR because MR = market price for them.

The other choices are incorrect:
- Increasing MC lowers profit.
- Lowering price (which lowers MR) is not generally a way to increase profit unless it moves MR toward MC in a specific situation.
- Keeping MC below MR or MR below MC is not profit‑maximizing — you should adjust output until MC = MR.