To analyze the firm's production decision, we need to calculate the marginal cost and marginal revenue associated with increasing production from 6,000 to 8,000 units.
1. Calculate Marginal Cost (MC):
- Production cost at 6,000 units = $58,000
- Production cost at 8,000 units = $85,000
The increase in costs when increasing the production from 6,000 to 8,000 units: \[ \text{Change in cost} = \text{Cost at 8,000 units} - \text{Cost at 6,000 units} \] \[ = 85,000 - 58,000 = 27,000 \]
The increase in quantity produced: \[ \text{Change in quantity} = 8,000 - 6,000 = 2,000 \]
Now, we can calculate the marginal cost per unit by dividing the change in cost by the change in quantity. \[ \text{Marginal Cost (MC)} = \frac{\text{Change in cost}}{\text{Change in quantity}} \] \[ = \frac{27,000}{2,000} = 13.5 \]
2. Calculate Marginal Revenue (MR): The firm sells each unit for $10. Therefore, the marginal revenue from selling an additional unit remains constant at $10 per unit: \[ \text{Marginal Revenue (MR)} = 10 \]
3. Compare Marginal Cost and Marginal Revenue:
- MC = $13.5
- MR = $10
Conclusion: Since the marginal cost ($13.5) is greater than the marginal revenue ($10), it indicates that the firm is not maximizing its profits. Continuing production at this level would mean producing units that cost more to make than they bring in revenue, resulting in lower overall profits.
Therefore, the correct response is: No, because marginal cost is now greater than marginal revenue.
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